Key Differences Between Perpetual and Traditional Futures

Perpetual and traditional futures represent distinct paradigms within the realm of financial derivatives, each characterized by unique features and operational frameworks. Perpetual futures, unlike their traditional counterparts, lack an expiry date, enabling traders to hold positions indefinitely. This perpetual nature is sustained through a funding mechanism that ensures the contract price aligns closely with the underlying asset's spot price. Conversely, traditional futures adhere to fixed expiry dates, necessitating periodic rollovers or settlement. While both instruments facilitate speculative trading and hedging strategies, their structural disparities encompass aspects such as funding rates, liquidity dynamics, and risk management approaches, thereby influencing their respective roles within financial markets.