A traditional future expires on a set date, and its price converges to spot at expiry. A perpetual never expires; instead, longs and shorts exchange funding payments at regular intervals. When the perpetual trades above the spot index, longs pay shorts, which encourages selling it back toward spot, and the reverse happens when it trades below. Perpetuals are the most traded crypto derivative.
Example
You short 1 ETH on a perpetual at $3,000 with 5× leverage, posting $600 of margin. ETH falls to $2,700 over four days, a $300 price profit. In those four days you held through 12 funding periods at an average of +0.01%, so as a short you also received about 12 × 0.01% × $2,850 ≈ $3.40 in funding.
Why it matters
Perpetuals let you go short as easily as long, trade with leverage and hold without rolling contracts. They also bring funding, mark prices and liquidations, which a spot trader never deals with. Every journal entry for a perpetual trade should include fees and funding to show the true result.
Common mistake
Treating a perpetual as spot with leverage. Holding one for months pays or earns funding every period, and a high-leverage position can be liquidated by a wick that a spot holder would simply sit through.
Put it into practice
- Free toolLive funding rate trackerCurrent perpetual funding rates for BTC, ETH, SOL and other majors across five exchanges, normalised to 8 hours and annualised. Updated every 5 minutes.
- Free toolPnL & R-multiple calculatorWork out gross and net PnL of a long or short after maker and taker fees, the ROE on your margin at any leverage and the trade's R-multiple.
FAQ
- What is the difference between perpetual and quarterly futures?
- Quarterly futures expire on a fixed date and settle to the index price; their premium over spot is the basis. Perpetuals never expire and use funding to stay near spot instead.
- Can a perpetual's price differ from spot?
- Yes, usually by a small premium or discount. Funding is designed to pull it back, but during strong trends the gap can stay open for a while.
- Do I pay funding if I only hold for a few hours?
- Only if you hold a position at a funding timestamp. A trade opened and closed between two settlements pays no funding.