Which features set perpetual contracts apart from futures contracts in the realm of digital assets?

3 answers

• mestrelanMar 29, 2022 · 3 years ago
  Perpetual contracts and futures contracts are both popular trading instruments in the digital assets industry. However, there are several key differences that set them apart. Firstly, perpetual contracts do not have an expiration date, while futures contracts have a fixed expiration date. This means that perpetual contracts can be held indefinitely, allowing traders to maintain their positions for as long as they want. On the other hand, futures contracts require traders to close their positions before the expiration date, which adds an additional layer of complexity to trading strategies. Another major difference is the funding mechanism. Perpetual contracts use a funding rate to ensure that the contract price closely tracks the underlying asset price. This funding rate is exchanged between long and short positions every few hours, which helps to prevent the contract price from deviating too far from the spot price. Futures contracts, on the other hand, do not have a funding mechanism and rely solely on the supply and demand dynamics of the market. In terms of risk management, perpetual contracts offer the benefit of not being subject to liquidation. In futures contracts, if the price of the underlying asset moves against a trader's position, they may be forced to liquidate their position to avoid further losses. This is not the case with perpetual contracts, as traders can hold their positions for as long as they want without the risk of liquidation. Overall, the key differences between perpetual contracts and futures contracts lie in their expiration dates, funding mechanisms, and risk management implications. Traders should carefully consider these factors when choosing between the two instruments.
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• Daniel HrndzJan 21, 2024 · a year ago
  Perpetual contracts and futures contracts are two different types of trading instruments in the digital assets industry. Perpetual contracts, as the name suggests, do not have an expiration date, while futures contracts have a fixed expiration date. This means that traders can hold perpetual contracts for as long as they want, whereas futures contracts require traders to close their positions before the expiration date. Another difference is the funding mechanism. Perpetual contracts use a funding rate to ensure that the contract price closely tracks the underlying asset price. This funding rate is exchanged between long and short positions every few hours, which helps to keep the contract price in line with the spot price. Futures contracts, on the other hand, do not have a funding mechanism and rely solely on market supply and demand. In terms of risk management, perpetual contracts offer more flexibility. Traders can hold their positions without the risk of liquidation, even if the price of the underlying asset moves against them. Futures contracts, on the other hand, carry the risk of liquidation if the price moves too far in the opposite direction of a trader's position. Overall, the key differences between perpetual contracts and futures contracts lie in their expiration dates, funding mechanisms, and risk management implications. Traders should consider these factors when choosing which instrument to trade.
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• Areif MunandarDec 24, 2023 · 2 years ago
  Perpetual contracts and futures contracts are two common types of trading contracts in the digital assets industry. Perpetual contracts, also known as perpetual swaps, are designed to mimic a traditional futures contract without an expiration date. This means that traders can hold perpetual contracts for as long as they want, providing them with more flexibility in their trading strategies. One key feature that sets perpetual contracts apart from futures contracts is the funding mechanism. Perpetual contracts use a funding rate to ensure that the contract price closely tracks the underlying asset price. This funding rate is exchanged between long and short positions every few hours, which helps to prevent the contract price from deviating too far from the spot price. Futures contracts, on the other hand, do not have a funding mechanism and rely solely on market supply and demand. In terms of risk management, perpetual contracts offer the advantage of not being subject to liquidation. This means that traders can hold their positions without the risk of being forced to close their positions if the price moves against them. Futures contracts, on the other hand, carry the risk of liquidation if the price moves too far in the opposite direction of a trader's position. Overall, perpetual contracts and futures contracts have their own unique features and advantages. Traders should consider their trading strategies and risk tolerance when choosing between the two instruments.
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