Definition of Perpetual Contracts
Perpetual Futures are an innovative type of financial derivative that calculates prices, trades, and settles in the underlying currency. Perpetual contracts have no expiration or delivery date, and users can hold the contract indefinitely. This type of contract is often used for digital currency transactions, such as Bitcoin Perpetual Contracts (BTC-PERP).
Features of Perpetual Contracts No delivery date: Perpetual contracts have no fixed expiration or delivery date, and users can hold the contract indefinitely.
Funding mechanism: Since there is no delivery date, perpetual contracts need to use a "funding mechanism" to anchor the contract price to the spot price.
Leverage effect: Investors can choose to use leverage to trade, increasing the possibility of risk and return.
Price volatility: Since there is no delivery date, the price of perpetual contracts is more susceptible to market sentiment and liquidity, and the price fluctuates greatly.
Differences between Perpetual Contracts and Futures Contracts Delivery date: Traditional futures contracts have a fixed delivery date, while perpetual contracts do not.
Funding Rate: Perpetual contracts adjust prices through funding rates to keep them close to spot prices.
Applicable scenarios: Futures contracts are more suitable for scenarios that require physical delivery, while perpetual contracts are more suitable for speculative and hedging investors.
Long: Long in English, long position in English is Long Position. Investors predict that the price of an asset will rise, so they buy the asset in the hope that they can sell it at a higher price in the future. In the case of long, the price of the virtual currency will rise to make a profit, and the price will fall to lose money.
Short: Short in English, long position in English is Short Position. Therefore, the asset is borrowed and sold immediately, hoping to buy it back at a lower price in the future. In the case of short, the price of the virtual currency will fall to make a profit, and the price will rise to lose money.
Leverage ratio
In trading, leverage refers to the amount of funds that investors borrow to increase the scale of their investment. The leverage ratio indicates the proportion of funds borrowed by investors relative to their own funds. For example, 10 times leverage means that the investor borrowed 10 times the amount of his own funds to trade.In this case, the profit of the contract will be magnified 10 times, but the loss will also be magnified 10 times.