For investors, perpetual contracts are a simple way to hold leveraged positions in a given market with no expiry date. In addition, investors can obtain interest with the help of the permanent financing interest rate, while minimizing the risk of the underlying assets. So, what exactly is a perpetual contract? Why use perpetual contracts? Now, follow Xiao Bian to have a look.
What is a perpetual contract?
The perpetual contract is an innovative financial derivative. It is similar to the traditional futures contract. The biggest difference is that the perpetual contract has no expiration date or liquidation date, and users can hold positions indefinitely.
In addition, the concept of spot price index is introduced into the perpetual contract, and through the corresponding system, the price of the perpetual contract returns to the spot index price. Therefore, unlike traditional futures, the price of the perpetual contract will not shift too much from the spot price in most of the time.
Imagine a futures contract for a physical commodity, such as gold. In the past futures markets, these contracts marked the delivery date of gold. That is, gold should be settled when the futures contract expires. Because in the traditional futures market, it is stipulated that one party owns gold, which will lead to the "holding cost" of futures contracts.
Perpetual contracts use the characteristics of futures contracts, especially without the need to deliver specific products. At the same time, it followed the action of the spot market to narrow the gap between the futures market and the marked price. Compared with traditional futures contracts, this is a great progress.
Perpetual contracts have the following five characteristics:
(1) No delivery date
Perpetual contracts are not subject to time and have no delivery date. Investors can make long-term investments to obtain more long-term investments.
(2) Always lead to spot market price
Another feature of the perpetual contract is that the transaction price always leads to the spot market price. The contract introduces the concept of the spot price index, and through the corresponding system, the price of the perpetual contract returns to the spot index price. Asset expenditure is an important way to ensure this goal.
Therefore, unlike traditional futures, the price of a perpetual contract will not shift too much from the spot price in most of the time.
(3) Maximum 100 times flexible adjustable lever
Perpetual contracts provide up to 100 times of leverage. Investors can adjust flexibly after opening positions according to trading requirements. The platform provides elastic risk protection while ensuring investors' best trading experience.
(4) Automatic reduction system guarantees investors' rights and interests
Select a complete through position system rather than a risk sharing system to ensure the rights and interests of investors. This system is used to determine who is responsible for compulsory position closing and effectively protect the interests of investors from the impact of high losses caused by high-risk speculators.
(5) Double price mechanism
The dual price mechanism is selected, and the marked price is used as the opening price of the strong leveling, and the marked price refers to the spot price of the global mainstream trading platform in real time.
Why use perpetual contracts?
Benefits of perpetual contracts
1. The important advantage of a perpetual contract is that you can have the contract indefinitely.
2. No expiration date or implementation date means that even if the price is opposite to your position, you will not immediately fall into a deep loss.
On the contrary, as long as you have enough money to keep your position, you can continue to hold until the price is good for you again.
3. The probability of collateral or leveraged transactions reaches 100 times.
Because of the high leverage ratio, investors can open or close positions only by applying a small part of the balance.
Therefore, compared with direct investment in underlying securities, contracts are likely to earn higher profits from smaller initial expenses.
4. Investors can minimize the risk by mastering the financing interest rate.
Another advantage is that speculators can reduce risk by considering the financing interest rate.
The financing interest rate is a system that provides price stability between the S&P price and the index price (target price).
5. No matter double or short, you won't lose.
Whether the market is a bull market or a bear market, once you have the correct analysis, you can make money.
6. There is no sliding point - in the cryptocurrency market, some illegal exchanges use "speculation to increase the stock price, sell at every high price", "connection deviation" and "elevation selling price" to adjust market trends and prices to defraud assets.
Having said that, I believe you have a certain understanding of what a perpetual contract is and why it should be used. In general, the variables of the digital currency market are very unstable, and investment is accompanied by certain risks. I also remind investors that they must understand clearly before deciding to use the perpetual contract, do a good job of risk analysis, and do not invest blindly.
