Futures contracts of unlimited duration – what are they?
Futures contact means a contract to buy or sell a currency, commodity or other instrument at a specified price and at a specified time in the future.
Unlike traditional spot markets, transactions on these markets are not immediately settled. Trading in futures contracts is based on two counterparties who conclude an agreement between themselves. The agreement defines the settlement of the subject of the contact in the future. Moreover, the futures market does not allow users to buy directly, sell digital assets or sell goods. Traders trade in contracts, and the actual turnover of assets, which refer to a given contract, takes place after the contract is executed.
Futures contracts – what are they useful for?
– Short exposure,
– hedhing and risk management,
– access to the lever.
Characteristics of perpetual futures contracts
This is a special type of futures contract. Unlike the traditional ones, there is no expiry date here. You can keep an open position as long as you like. Besides, trading in contracts is based on the index base price of the asset. Index Proce is the average price of an asset from the most important spot markets where it is available. When calculating Index Price, the trading volume in the spot markets is also taken into account.
Unlike traditional futures contracts, futures contracts are often closed at a price that is very close to or equal to the underlying asset price. However, the biggest difference is the settlement date itself.
What is Initial Margin?
The Initial Margin is the minimum amount of funds that we need to deposit into a special account to be able to open a leveraged position.
What is Maintenance Margin?
A Maintenance Margin means the minimum amount of collateral that we need to have in our account to keep our open trading positions open. Thus, if our Maintenance Margin balance falls below a certain level, in more cases this will result in a so-called margin call, i.e. a request to add additional funds to your account or to automatically close open positions. Most of the crypto on which futures contracts and leverage are currently available will rather do the first one.
What is Auto-delevaraging?
Auto-delevaraging is literally an automatic reduction of our debt. It refers directly to a situation in which, in turn, the liquidation of a trader’s position itself occurs only when the insurance fund stops functioning for various reasons. Although in reality it is really unlikely, such an event would require traders who have made a profit on their positions to contribute a portion of their profits towards covering the losses of the traders who have failed this time.
Futures contracts of unlimited duration - what are they?
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