Perpetual futures glossary

Perpetual futures, or perps, are derivative contracts that track an asset's price and have no expiry date. Because there is no settlement date, longs and shorts exchange a periodic funding payment that keeps the contract close to the underlying index price. Traders use them for leverage and for easy shorting, most often on crypto assets such as BTC and ETH.

Perps is short for perpetual futures, the crypto derivative contracts that have no expiry date and stay near spot through regular funding payments between longs and shorts. Traders hold perps instead of spot when they want leverage, to go short, or to avoid moving coins. Perps trade around the clock on both centralized and on-chain venues.

Perpetual futures work by letting you hold a leveraged long or short position with no expiry, backed by margin and marked against an index price. Every funding interval, traders on one side pay the other an amount based on the funding rate and position size. You stay in the trade until you close it or the position is liquidated.

Regular futures have a fixed expiry date and settle or roll, often on regulated exchanges such as CME, while perpetual futures never expire and use funding payments to stay aligned with spot. Perpetuals usually trade around the clock, including weekends, while dated futures keep exchange hours. Funding replaces the expiry convergence you would otherwise rely on.

Spot trading means buying the asset itself, while perpetual futures are a contract on its price that you can trade with leverage and short just as easily as you can buy. A spot position carries no funding payments or liquidation risk if unleveraged. A perpetual position can pay or earn funding and can be liquidated if margin runs out.