Perpetual futures

Perpetual futures are derivative contracts that track the price of an underlying asset but, unlike traditional futures, have no expiry or settlement date, so a position can be held indefinitely. To keep the contract price anchored to the underlying spot price, they use a periodic payment called the funding rate exchanged between long and short holders.

Perpetuals typically allow leverage, meaning a position is backed by collateral (margin) smaller than its notional size. Because there is no delivery, positions are settled in cash. A common misconception is that a perpetual price always equals spot; it can drift, and the funding mechanism nudges it back rather than forcing an exact match.