Looking to take your trading knowledge to the next level? Start by learning perpetual futures contracts ⤵️
A futures contract is an agreement to buy or sell a commodity, currency, or another instrument at a predetermined price at a specified time in the future.
Thus, unlike conventional futures, perpetual contracts are often traded at a price that is equal or very similar to spot markets. However, during extreme market conditions, the mark price may deviate from the spot market price. Still, the biggest difference between the traditional futures and perpetual contracts is the ‘settlement date’ of the former.Initial margin is the minimum value you must pay to open a leveraged position.
The funding rate is based on two components: the interest rate and the premium. The interest rate may change from one exchange to another, and the premium varies according to the price difference between futures and spot markets. To illustrate, let’s suppose that Alice has $2,000 in her futures account, which is used to open a 10x BNB long position at $20 per coin. Note that Alice is buying contracts from another trader and not from the exchange. So on the other side of the trade, we have Bob, with a short position of the same size.