What is a perpetual contract? How much do you know about it?
Perpetual contracts are an innovative type of financial derivative. They are similar to traditional futures contracts, but there is no expiration date or settlement date, and users can hold positions indefinitely.
The main features of perpetual contracts include:
1. No delivery date: traders can hold for a long time without worrying about the contract expiration and delivery, and have the opportunity to obtain greater investment returns.
2. Anchoring the spot market price: By introducing a funding fee mechanism, etc., the contract price can return to the spot index price, and will not deviate too much from the spot price most of the time.
3. Provide higher leverage: usually up to 100 times, traders can flexibly adjust after opening a position according to demand, but high leverage also means higher risk.
4. Automatic position reduction mechanism: adopt a complete position-breaking mechanism instead of a risk-sharing mechanism to determine who bears the forced liquidation, effectively protecting the interests of traders from the huge losses caused by high-risk speculators.
5. Double price mechanism: The mark price is used as the trigger price for forced liquidation. The mark price refers to the spot price of the global mainstream trading platform in real time to avoid unreasonable liquidation caused by drastic price fluctuations on a single exchange.
In perpetual contracts, funding is an important factor. It is usually generated once every period of time (such as 8 hours or 1 hour) to ensure that the contract price is close to the spot price. When the perpetual contract price is higher than the spot price, the longs will pay the shorts for funding; conversely, the shorts pay the longs for funding. The calculation formula for the funding rate is relatively complex and may be related to the liquidity of the market.
It should be noted that perpetual contracts have higher risks and their price fluctuations may result in larger profits or losses. Before trading perpetual contracts, investors should fully understand the relevant rules and risks and make prudent decisions based on their own risk tolerance and investment experience.
The above content is for information sharing only and does not constitute any investment advice! Investment is risky, so be cautious when entering the market!
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