Do you want to trade the price movements of stocks or cryptocurrencies without owning the underlying assets, and wonder how you can keep a position open indefinitely? This article explains what perpetual futures are, how they differ from traditional futures, and what you should consider before using them to earn passive income or speculate.
What is a perpetual future?
A perpetual future is a type of derivative contract that tracks the price of an underlying asset—such as a stock, Bitcoin, or a commodity—while having no set expiration date. Unlike traditional futures, which settle on a specific date and require the holder to either close the position or roll it over to a new contract, a perpetual future can be held as long as the trader wishes, provided they meet margin requirements.
To keep the contract price aligned with the spot price of the underlying asset, perpetual futures use a mechanism called funding payments. At regular intervals (often every eight hours), traders on the long side (those betting the price will rise) pay a small fee to traders on the short side (those betting the price will fall) if the contract price is above the spot price, and vice‑versa if the contract price is below the spot price. This payment incentivises the market to keep the contract price close to the actual market price.
The contract is typically cleared through a regulated clearinghouse, which acts as the counter‑party to both sides and manages margin, settlement, and default risk. Because the contract never expires, traders do not need to worry about rolling over positions, which can simplify bookkeeping and reduce transaction costs.
How does a perpetual future differ from other derivatives?
- Expiration date: Traditional futures have a fixed settlement date; perpetual futures do not.
- Funding payments: Only perpetual futures use periodic funding to tether the contract price to the spot price.
- Leverage: Both types often allow leveraged exposure, but perpetual contracts usually offer higher leverage because the clearinghouse can manage risk continuously through funding and margin calls.
- Settlement: Traditional futures settle in cash or the underlying asset at expiration; perpetual futures settle continuously via funding and margin adjustments.
Real‑world example
In September 2026, the prediction‑market platform Kalshi filed a proposal with the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) to offer perpetual futures tied to individual U.S. stocks. The proposed contracts would have no preset expiration date and would rely on periodic funding payments to keep their prices aligned with the underlying equities. Kalshi plans to clear these contracts through its CFTC‑registered clearinghouse, Kalshi Klear. At the same time, Coinbase and Payward (owner of Kraken) submitted similar filings, indicating a growing interest in bringing crypto‑style perpetual futures to traditional equity markets.
What it means for you
If you are looking for a way to gain exposure to a stock’s price movements without buying the shares, perpetual futures can provide that flexibility. Because the contracts never expire, you can hold a position for weeks, months, or even years, adjusting your exposure as market conditions change. The funding mechanism means you may receive or pay small periodic fees, which can affect the overall cost of holding a position.
Perpetual futures also enable higher leverage, allowing you to control a larger notional amount with a relatively small amount of capital. While leverage can amplify profits, it also magnifies losses, and a margin call can liquidate your position if the market moves against you.
For those interested in earning passive income, some traders use short‑term strategies that collect funding payments from the opposite side of the market. However, this approach carries risk because funding rates can change quickly, and you remain exposed to price movements of the underlying asset.
What to check before trading perpetual futures
- Regulatory status: Ensure the platform offering the contract is registered with the appropriate regulator (e.g., CFTC in the United States) and that the product complies with local securities laws.
- Clearinghouse credibility: Verify that the clearinghouse is well‑capitalized and has a track record of managing margin and default risk.
- Funding rate structure: Understand how often funding payments occur, how the rate is calculated, and whether you will be paying or receiving funding under typical market conditions.
- Leverage limits and margin requirements: Check the maximum leverage offered and the maintenance margin level that triggers a margin call.
- Liquidity and spread: Higher liquidity usually means tighter bid‑ask spreads, reducing transaction costs when entering or exiting a position.
- Risk management tools: Look for features such as stop‑loss orders, take‑profit orders, and real‑time margin monitoring.
FAQ
What happens if I hold a perpetual future for a long time?
You will continue to receive or pay funding payments at each interval, and your position will be marked to market daily. As long as you maintain the required margin, the contract remains open indefinitely.
Can I use perpetual futures to hedge a stock position I own?
Yes. By taking an opposite position in a perpetual future, you can offset potential losses in your physical stock holding. Keep in mind that funding payments and leverage will affect the overall cost of the hedge.
Are perpetual futures safe for beginners?
They can be riskier than buying the underlying asset because of leverage and funding payments. Beginners should start with low leverage, use strict stop‑loss orders, and fully understand the funding mechanism before committing significant capital.
Do perpetual futures generate any passive income?
If you hold a short position when funding rates are positive, you may receive regular funding payments, which can be viewed as a small income stream. However, this income is not guaranteed and can reverse if market conditions change.
This article references reporting from cointelegraph.com.
