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Crypto Futures Trading Explained: Contracts, Margin & Perpetuals

TL;DR. A futures contract is an agreement to buy or sell an asset at a set price on a set date, traded on margin rather than paid in full, which is what makes leverage and shorting simple. Crypto futures trading is dominated by the perpetual, a contract with no expiry that stays anchored to spot by a funding payment between longs and shorts. Perpetuals are what scalpers use: a short is a sell order, the maker fee is a fraction of spot's, and the BTC and ETH contracts are the deepest markets in crypto. The same features are the risk: margin means a liquidation price, and the lesson ends with the arithmetic of where it sits.

Prerequisites for this lesson: Spot trading (the reference the future is priced from), Crypto leverage (margin and liquidation from the trader's side). Lesson 2 of the instruments section.

Where futures come from​

Futures were invented for grain. In the mid-nineteenth century American farmers all brought their harvest to Chicago at once, prices collapsed at harvest and spiked in the off-season, and both sides wanted a way to fix a price in advance. The forward contract did that, as a private agreement between a farmer and a merchant, and it had a flaw: whichever side the price moved against had a reason to default. The Chicago Board of Trade, founded in 1848, standardised the contracts in the 1860s, with a set quality and quantity, a clearing house between the parties and a performance bond posted by both. The bond is what we now call margin, and it is the reason a contract can be traded by people who never intend to touch the grain.

Two of those design choices are the whole reason scalpers use futures today: the position is guaranteed by margin rather than paid for in full, and selling a contract you do not own is as ordinary as buying one.

Dated futures​

A traditional future has an expiry. On crypto venues the standard contracts are quarterly, expiring on the last Friday of March, June, September and December, at 08:00 UTC on Deribit and Binance, settled against an average of the spot index over the final minutes rather than a single print. As expiry approaches the future's price converges on spot, because at expiry it becomes spot.

Between now and expiry the future trades at a basis to spot: usually above it, which is called contango and reflects the cost and the appetite for carrying a long position for that time, occasionally below it, backwardation, which appears in stress when the demand to be short outweighs the demand to be long. The basis is a market price in its own right. A trader who buys spot and sells the quarterly future against it locks in the basis as a return regardless of direction, the cash-and-carry trade, and that arbitrage is what keeps the basis from drifting far.

Holding a dated future past expiry means rolling to the next contract, which costs a spread and a pair of fees each quarter. For a scalper that is beside the point; a scalp does not last until Friday.

The perpetual​

The perpetual swap was introduced by BitMEX in 2016 and became the most traded instrument in crypto. It is a future with no expiry: a position can be held for three seconds or three years. Without an expiry there is nothing to force convergence to spot, so the venue uses funding: at intervals, or continuously on some venues, the side that is crowded pays the other side a small percentage of the position, sized from the gap between the perpetual and spot. When the perpetual trades above spot, longs pay shorts, which nudges longs to close and pulls the price down; below spot, the reverse. The funding lesson has the schedule and the arithmetic; the point here is that funding is the perpetual's substitute for an expiry.

Two flavours exist. Linear contracts are margined and settled in a stablecoin, usually USDT, so a BTCUSDT perpetual's P&L is in dollars. Inverse contracts are margined and settled in the coin itself, so a long BTCUSD inverse contract that gains dollars gains fewer BTC than the dollar move suggests, because the collateral has risen too. Linear contracts are the simpler instrument and the one the site's examples use.

Margin, mark price and the engine​

A perpetual position is guaranteed by margin. Post $1,000 against a $10,000 position and the leverage is 10×: a 0.5% move in BTC is a $50 change in the position, 5% of the margin. Gains and losses scale identically, which the leverage lesson works through.

Three mechanisms sit underneath every position and are worth knowing before the first trade:

  • The mark price. Positions are valued and liquidated against a mark price built from the spot index plus a funding-adjusted basis, not against the last trade on the venue. A single stray print cannot liquidate you; a move in the index can.
  • Maintenance margin and the liquidation price. When the margin left in the position falls to the maintenance requirement, the venue closes it with a market order. With a 0.5% maintenance rate, which is in the range the large venues use for the lowest tiers on BTC, that is at roughly a 9.5% adverse move at 10×, 4.5% at 20× and 1.5% at 50×. The liquidations lesson has the table and what happens to the market when many positions are closed at once.
  • The insurance fund and auto-deleveraging. If a liquidation cannot be filled at a price that covers the position's loss, the venue's insurance fund absorbs the gap; if the fund cannot, the venue closes profitable positions on the other side to balance the book. The large venues rarely trigger this on majors; small venues do.

Why scalpers trade perpetuals​

Shorting is a sell order. No borrowing, no interest, no delay. The range fade and every other two-sided setup depend on it.

Fees. Maker 0.02% and taker 0.05% at the entry tier on the large venues, against 0.1% each way on spot. The execution lesson prices the difference at $6,600 a month for an active scalper.

Depth. BTC and ETH perpetuals are the deepest markets in crypto, with one-tick spreads through most of the day and books that absorb retail size without moving. The order book lesson describes what that looks like.

Capital. Margin lets a stop-based position of the right size be held with a fraction of its notional as collateral. That is a convenience, not an edge: the sizing lesson sets the position from the stop, and the leverage is chosen last so that the liquidation price sits well beyond it.

What the perpetual charges for those features​

  • Funding. A position held through settlements pays or receives it; at +0.1% per eight hours, a long costs its holder 0.3% a day. A two-minute scalp rarely meets a settlement; a position held overnight always does.
  • The liquidation price. Spot cannot close you; a perpetual can, and does so with a market order at the worst moment of the move. The stop must always be closer than the liquidation price.
  • Being part of the cluster. Leveraged positions opened at the same prices with the same leverage share the same liquidation prices, and the liquidations lesson explains how that cluster becomes a cascade.

Beyond direction​

Dated futures and perpetuals also support trades that are not bets on direction: the cash-and-carry basis trade above, and calendar spreads, buying one expiry and selling another to trade the shape of the basis curve rather than the price. They are real strategies with their own risks (the basis can widen before it converges, and the margin on both legs has to be maintained through it) and they are outside the scope of a scalping site. The options lesson covers the other instrument built for something other than direction.

Where to go from here​

The perpetual is the scalper's instrument. The last lesson of the section is the derivative that is not, and what it is for instead.

Related guides:

This article is educational content, not investment advice. Trading derivatives carries substantial risk, including total loss of capital. See disclaimer.

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