contrats à terme conventionnels

Regular futures and perpetual futures are the two main types of contracts related to crypto trading. These two contracts differ on several levels that should be known, especially for the begginer investors.

Regular and perpetual futures contracts: what are they?

Conventional futures are standardized contracts that are written by futures exchanges. These are basic contracts that correspond to crypto trading or all kinds of activity related to crypto futures. A conventional futures contract involves delivering physical or financial commodities of a quantity specified in advance. Perpetual futures contracts have similarities to classic contracts. These are crypto derivatives whose price is closely tied to the price of the spot asset via the funding rate. Unlike the classic futures contract, the perpetual futures contract is not linked to a time constraint in terms of delivery or settlement. The trader can keep a single position all his life if he wishes.

What are the differences between regular and perpetual futures contracts?

The underlying assets

Regular futures contracts relate only to financial assets or physical commodities:

  • Soy
  • Oil
  • SharesObligations

Perpetual futures contracts are exclusively subject to a cryptocurrency:

  • BTC/USDT
  • USDT/ETH etc

Trading hours

Conventional futures trading hours are set by the futures exchanges. In practice, they are 9 hours a day with monthly, quarterly or annual delivery and/or settlement.

On the other hand, perpetual futures contracts are negotiable every day (24 hours a day, on any cryptocurrency trading platform. In addition, these types of contracts are not subject to delivery constraints and/or of settlement.

The mechanisms

In practice, regular futures work on the basis of a clawback mechanism. The trader must pay the cost of recovering his profits to compensate for the loss suffered by other traders who could not sell their position in time because of a price that was too high.

Perpetual futures contracts are based on the Auto-deleveraging (ADL) mechanism. It is a concept which makes it possible to minimize the losses by reducing the position of the adversaries.

The price

Conventional futures contracts often deviate from the spot price of their underlying asset. Conversely, the prices of perpetual futures essentially depend on the price of the underlying asset they are tracking. They are immune to any risk of malicious market manipulation. In addition, their price is often aligned with the current stock market price, which favors both the seller and the buyer.

What type of contract to choose to start crypto trading?

In practice, perpetual futures contracts are more suitable for the beginners investors. These types of contracts have many advantages, such as:

  • They are not subject to an expiry date: the trader can keep his initial position indefinitely.
  • They allow to adjust the leverage in a flexible way: the trader can adjust the ration freely after opening a position.
  • They offer optimal protection against all risks.
June 17, 2022
bitcoin-crypto-trading

Crypto trading: what are the differences between conventional and perpetual futures?

Regular futures and perpetual futures are the two main types of contracts related to crypto trading. These two contracts differ on several levels that should be […]