Perpetual futures are simply structured differently from traditional futures contracts. The key point: they do not expire. With normal futures, physical delivery is required at the expiration date—gold, oil, whatever. This means storage costs, transportation, insurance. The longer the period until settlement, the more expensive and unpredictable everything becomes. In the end, the price converges with the spot market, and the position is settled.

With perpetual futures, this never happens. There is no expiration date, no delivery day. Instead, these contracts use a financing mechanism to keep the price tied to the market. When the contract price is above the spot price, long positions pay short positions a fee. This pushes the price back down. Conversely, if the contract trades below the spot price, short positions pay long positions. This keeps everything in balance.

The financing rate is settled every eight hours—at 04:00 UTC, 12:00 UTC, and 20:00 UTC. You pay or receive financing only if you hold a position at these times. The amount depends on two factors: the interest rate (most exchanges set it at 0.01% per interval) and the premium resulting from the price difference between the contract and the fair market value.

Why trade with it? Perpetual futures offer significantly higher leverage without constant rebalancing. You simply buy or sell a contract and can hold the position indefinitely—as long as the maintenance margin is sufficient. This is not possible with traditional futures. In those, you must exit before expiration or roll over the contract.

Historically, economist Robert Shiller proposed in 1992 creating a futures market with cash settlement that does not expire—exactly the concept behind perpetual futures. The idea was to reduce costs and enable markets for illiquid assets. Today, perpetual futures are mainly active in the cryptocurrency world.

But beware: these products are not regulated by the U.S. Commodity Futures Trading Commission (CFTC). That means if something goes wrong, there is no government compensation. The counterparty risk is high, and you should really know what you’re getting into. Perpetual futures are complex instruments—not suitable for everyone.

A practical example: You buy a Bitcoin perpetual future at $50,000. You only put up a fraction of that as margin, say 5%. If the price rises to $55,000, your profit doubles (because you are leveraged). But if it falls to $45,000, your loss doubles. That’s the sharpness of perpetual futures. Gains and losses are settled daily at the current market price (marking-to-market). Both sides can enter or exit at any time, as long as liquidity is available.

The special feature: since there is only one perpetual contract per asset—not multiple with different expiration dates—liquidity is concentrated and often better than with traditional futures. This makes perpetual futures attractive to active traders, although the risk should not be underestimated.