Perpetual Future Contracts Explained
To understand the functions of a Perpetual Future Contract it is important to first fully understand the meaning of a future contract . A futures contract is an arrangement to buy or sell a commodity, currency, or another tool at a prearranged price at a definite time in the future. Unlike an old-fashioned spot market, in a futures market, the trades are not ‘settled’ promptly. Instead, two counterparties will trade a contract, that defines the clearance at a future date. Also, a futures market doesn’t allow users to unswervingly purchase or sell the product or digital asset. Instead, they are trading a contract representation of those, and the actual trading of assets (or cash) will happen in the future - when the contract is exercised. As a simple example, consider the case of a futures contract of a physical commodity, like wheat, or gold. In some traditional futures markets, these contracts are marked for delivery, meaning that there is a physical delivery of ...