Perpetual futures have no scheduled expiry, but funding and margin still matter. Separate price profit, funding cash flows, notional exposure and liquidation risk.
Perpetual futures
Perpetual futures are derivative contracts that provide ongoing exposure to an underlying price without a scheduled expiry. Also called perpetual swaps or perps, they are widely associated with crypto derivatives. They let a trader maintain long or short exposure without repeatedly replacing an expiring contract, but funding payments and margin requirements continue while the position is open. Deribit's inverse perpetual specification describes this no-expiry structure and its funding mechanism.
The useful distinction is between a position's price exposure, its cost of remaining open and its ability to survive. Correctly predicting the eventual price does not settle the other two questions.
What replaces expiry?
A dated futures contract has an expiry procedure that connects the contract to its underlying reference. A perpetual has no such scheduled endpoint. Its funding rate changes the economics of holding long and short positions, encouraging the contract price to remain near a reference index. It does not guarantee that the two prices coincide.
For example, Deribit's inverse perpetual rules specify that positive funding is paid by longs to shorts, while negative funding reverses the transfer. Funding is quoted as an eight-hour rate but accrued continuously. The quotation period is therefore different from the cash-posting schedule. This is a specific venue's convention, not a universal timetable. Source: Deribit inverse perpetual.
A funding payment is distinct from a trading commission. It can be a receipt or an expense for the same position at different times; entering while the displayed rate is favourable does not lock that rate for the life of the trade.
A profitable price move, a smaller trading profit
Consider a fictional linear perpetual quoted and settled in USD. A trader is long 1 underlying unit, with entry and exit execution prices of 100 and 105 USD per unit. The quantity includes any contract multiplier. Assume the position stays open until the chosen exit, with no forced close, and that total funding paid over the holding period is 1 USD.
The ledger is:
Component
Calculation
Result
Price profit
1×(105−100)
+5 USD
Funding cash flow
Amount paid by the long
−1 USD
Net trading profit before fees
5−1
+4 USD
Synthetic USD profit ledger: a long of 1 unit enters at 100 and exits at 105 USD per unit. Price profit of 5 USD less 1 USD funding paid leaves 4 USD before fees.
Original fictional linear-contract example. All profit bars are in USD; the position is assumed to survive to exit. Funding is a total cash payment over the holding period, not an assumed rate or exchange schedule.
For fixed signed quantity q, a linear contract's price component is q(Pexit−Pentry). Adding signed funding cash flows and subtracting trading fees gives the trading result under these assumptions. Here q is positive for a long and negative for a short. Using actual execution prices already includes the price effect of execution slippage; do not subtract that same slippage again.
The entry notional amount is 100 USD, the price exposure at entry. It is not the collateral deposit, an upfront purchase price for the underlying, or an amount the trader can withdraw. The 4 USD is a profit before fees, not ending account equity. Turning it into a percentage return requires a stated capital denominator and a consistent treatment of deposits, withdrawals and costs.
This example is deliberately linear and dollar-settled. Actual contracts can use a stablecoin or the underlying coin for settlement. Deribit's linear perpetual documentation specifies USDC settlement; its inverse perpetual specification describes USD-denominated contract exposure with coin-denominated margin and profit or loss. The payment formula and units must be read from the contract before building a ledger. Sources: linear specification, inverse specification.
The position may end before your forecast does
“No expiry” does not mean “no liquidation.” A trader must satisfy the venue's collateral and maintenance margin rules throughout the holding period. Price losses, funding debits and changes in the collateral's accepted value can reduce the account's buffer. Deribit, for example, describes automatic partial liquidation when its risk engine finds insufficient equity to maintain the positions, without first asking the trader to deposit more. Source: Deribit liquidations.
Three prices also have different jobs: an index is the external reference; a mark is the valuation price used under the venue's rules; a last trade is a past execution. They need not coincide. Deribit's perpetual specification explicitly distinguishes the mark calculation from the last traded price. A chart of last trades alone is therefore insufficient to reconstruct the account's marked profit or loss. Source: mark-price specification.
A long-spot, short-perpetual trade illustrates the consequence. It may offset much of the asset's directional exposure, but funding can reverse, the crypto futures basis can widen, and the short can require additional collateral before the hedge pays off elsewhere. Capital on another venue may be unavailable when it is needed. Receiving funding is not enough to establish an achievable net return.
The Crypto Basis and Funding project brief (membership required) develops this research question into a specification: compare carry after execution costs, allocate collateral across venues and set venue-risk limits. It is a project brief, rather than evidence that a strategy has already earned the proposed returns.
Before using a perpetual, identify the exact instrument, contract multiplier, quote and settlement currencies, index and mark rules, funding calculation and cash-posting schedule, accepted collateral and forced-close rules. Product availability also depends on the venue and the customer's eligibility and jurisdiction. The label “perpetual” answers the expiry question; the contract and account rules determine the cash flows and survival constraints.
John C. Hull, Options, Futures, and Other Derivatives, ninth edition, Global Edition, Pearson, 2018, Section 1.3, pp. 28–29: general long/short linear payoff conventions. Current perpetual mechanics use the venue documentation above.
