Definition
Perpetual futures are a type of futures contract that does not have a fixed settlement or expiration date. They are structured to closely follow the price of an underlying asset, such as a cryptocurrency, while allowing traders to hold long or short positions indefinitely. Instead of expiring, the contract’s price is kept in line with the spot market through a recurring funding mechanism between long and short positions.
As a derivative concept, perpetual futures are distinct from traditional futures because positions are theoretically open-ended and are typically margined and marked to market continuously. They are commonly traded with leverage, which magnifies both gains and losses relative to the underlying price movement. Perpetual futures form a core part of many crypto trading venues, sitting alongside related tools like standard futures and risk controls such as stop-loss orders and take-profit orders.
Context and Usage
Within trading, perpetual futures serve as a primary instrument for directional speculation, hedging, and price discovery on digital assets. Their design allows market participants to maintain exposure to an asset’s price without handling the asset directly or dealing with contract rollovers typical of dated futures. The absence of expiry makes perpetual futures particularly suited to high-liquidity, continuous markets like crypto exchanges.
Because perpetual futures are often traded with leverage, they are closely associated with risk management practices that rely on predefined exit levels, such as stop-loss orders and take-profit orders. The continuous nature of these markets can also intersect with concerns like front-running, where the timing and visibility of orders may affect execution quality. Overall, perpetual futures represent a foundational concept in modern crypto derivatives markets, shaping how prices, liquidity, and leverage interact across trading platforms.