Perpetual Futures Contract

A perpetual futures contract is a derivative instrument that allows traders to speculate on the price movement of an asset without an expiration date. Unlike traditional futures, which require the contract to be closed or rolled over at a specific time, perpetuals can be held indefinitely as long as the trader maintains sufficient margin.

To prevent price divergence from the underlying asset, these contracts utilize a funding rate mechanism. They are highly popular in cryptocurrency markets due to their high leverage capabilities and ease of access.

Traders use these to hedge existing positions or to gain directional exposure without the need to hold the actual asset. The risk profile includes liquidation risk, where the position is closed automatically if the margin falls below a maintenance threshold.