Perpetuals 101: A Comprehensive Guide
An overview of Orderly as a platform
What is a Perpetual Contract?
A perpetual contract, also known as a Perpetual Futures (Perps) contract, is a derivative financial instrument that allows traders to buy or sell an asset without a set expiration date. Unlike traditional futures contracts with specific settlement dates, perpetual contracts enable traders to hold positions indefinitely. These contracts are designed to closely track the underlying asset's price, using mechanisms like funding rates to maintain alignment.
Key Benefits
- Speculation in Both Directions: Traders can profit from both rising and falling prices by taking long or short positions.
- Leverage: Perpetual contracts allow traders to control larger positions with less capital, enhancing capital efficiency.
- Liquidity: The futures market often has higher trading volumes than the spot market, providing deeper liquidity and enabling trades to be executed with minimal price impact.