What are the differences between perpetual futures and traditional futures contracts?

3 answers

• user23075189Dec 08, 2022 · 3 years ago
  Perpetual futures and traditional futures contracts are both derivatives that allow traders to speculate on the price movements of an underlying asset. However, there are several key differences between the two. Firstly, perpetual futures contracts do not have an expiration date, unlike traditional futures contracts. This means that traders can hold their positions indefinitely without worrying about contract settlement or rollover. Secondly, perpetual futures contracts use a funding mechanism to maintain their price close to the spot price of the underlying asset. This funding mechanism ensures that the contract price closely tracks the market price, reducing the risk of large price discrepancies. Lastly, perpetual futures contracts often have a funding rate that is periodically exchanged between long and short positions. This funding rate is used to incentivize traders to keep the contract price aligned with the spot price. In contrast, traditional futures contracts do not have a funding rate. Overall, perpetual futures contracts offer more flexibility and convenience for traders, while traditional futures contracts have a fixed expiration date and lack the funding mechanism found in perpetual futures contracts.
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• Kokholm DuranMar 05, 2021 · 4 years ago
  Perpetual futures and traditional futures contracts are two different types of financial instruments used in the cryptocurrency market. Perpetual futures contracts are designed to mimic the behavior of traditional futures contracts, but with some key differences. One major difference is that perpetual futures contracts do not have an expiration date, while traditional futures contracts do. This means that traders can hold perpetual futures contracts for as long as they want, without worrying about contract settlement or rollover. Another difference is the funding mechanism used in perpetual futures contracts. This mechanism helps to keep the contract price in line with the spot price of the underlying asset. It ensures that the contract price closely tracks the market price, reducing the risk of large price discrepancies. In contrast, traditional futures contracts do not have a funding mechanism. Instead, they rely on the market forces of supply and demand to determine the contract price. Overall, perpetual futures contracts offer more flexibility and convenience for traders, while traditional futures contracts have a fixed expiration date and rely on market forces to determine the contract price.
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• mohamed hassanFeb 06, 2021 · 4 years ago
  Perpetual futures and traditional futures contracts are two popular trading instruments in the cryptocurrency market. While both allow traders to speculate on the price movements of an underlying asset, there are some key differences between them. Perpetual futures contracts, as the name suggests, do not have an expiration date. This means that traders can hold their positions for as long as they want without worrying about contract settlement or rollover. On the other hand, traditional futures contracts have a fixed expiration date, which adds an element of time constraint to the trading strategy. Another difference is the funding mechanism used in perpetual futures contracts. This mechanism helps to keep the contract price in line with the spot price of the underlying asset. It ensures that the contract price closely tracks the market price, reducing the risk of large price discrepancies. Traditional futures contracts, however, do not have this funding mechanism and rely solely on market forces to determine the contract price. In summary, perpetual futures contracts offer more flexibility and convenience for traders, while traditional futures contracts have a fixed expiration date and rely on market forces to determine the contract price.
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