In the fast-evolving world of cryptocurrency trading, futures contracts have become essential tools for managing risk and capitalizing on market movements. Among the most widely used derivatives are perpetual futures and expiry futures. While they share core mechanics—such as leverage, margin requirements, and the ability to go long or short—they differ significantly in structure and functionality. Understanding these differences is crucial for traders aiming to optimize their strategies and manage exposure effectively.
This article breaks down the key distinctions between perpetual and expiry futures, focusing on contract duration, funding mechanisms, and practical implications for traders. We’ll also explore how these instruments align with different trading styles and market conditions.
What Are Futures Contracts?
Before diving into the differences, it’s important to understand what futures are. A futures contract is a standardized agreement to buy or sell an asset at a predetermined price at a specified time in the future. In crypto, these contracts are typically settled in cash and track the price of underlying digital assets like Bitcoin or Ethereum.
Futures allow traders to speculate on price movements without owning the actual asset. They are commonly used for hedging, arbitrage, and leveraged trading. The two main types available on most major platforms are perpetual futures and expiry futures.
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Key Difference #1: Contract Expiry
The most fundamental difference lies in contract expiration.
Expiry Futures: Fixed Settlement Date
As the name suggests, expiry futures (also known as quarterly or monthly futures) have a set maturity date. On this date, the contract settles automatically based on a predefined index price, and all open positions are closed.
For example:
- A BTC-032825 contract expires on March 28, 2025.
- Traders must either close their position before expiry or let it settle.
This structure makes expiry futures ideal for traders with a specific time horizon—such as those hedging against price changes over a known period or speculating on events like halvings or regulatory announcements.
Perpetual Futures: No Expiration
In contrast, perpetual futures do not have an expiration date. Traders can hold their positions indefinitely, provided they maintain sufficient margin to avoid liquidation.
This flexibility is particularly valuable for:
- Long-term directional bets
- Swing traders who don’t want to roll over contracts
- Algorithmic strategies that require continuous exposure
Because there’s no fixed end date, perpetuals eliminate the need for frequent contract rollovers—a process that can incur slippage and transaction costs with expiry futures.
Key Difference #2: Funding Mechanism
Since perpetual futures never expire, a mechanism is needed to keep their price aligned with the underlying spot market. This is where funding rates come into play.
How Funding Rates Work
Funding is a periodic payment exchanged between long and short traders—not collected by the exchange. It serves to anchor the perpetual contract’s price to the spot price.
- If the perpetual price trades above spot → Longs pay shorts (positive funding rate)
- If the perpetual price trades below spot → Shorts pay longs (negative funding rate)
Funding typically occurs every 8 hours and is calculated as a percentage of the position value.
This system discourages prolonged deviations from fair value and ensures market efficiency. However, holding positions over funding intervals means traders must account for these recurring payments in their profit-and-loss calculations.
Expiry futures, by contrast, naturally converge with the spot price as they approach maturity—eliminating the need for funding mechanisms.
Practical Implications for Traders
Choosing between perpetual and expiry futures depends on your trading goals, time frame, and risk tolerance.
When to Use Perpetual Futures
- Short- to medium-term speculation: Ideal for traders leveraging momentum without worrying about expiration.
- High-frequency strategies: Automated bots often prefer perpetuals due to continuous pricing.
- Avoiding roll costs: No need to close and reopen positions monthly or quarterly.
However, frequent funding payments can erode profits during volatile or one-sided markets.
When to Use Expiry Futures
- Event-driven trading: Perfect for positioning ahead of known catalysts (e.g., Fed meetings, protocol upgrades).
- Options-like strategies: Can be combined with options or other derivatives for structured payoffs.
- Institutional hedging: Companies often use expiry contracts to lock in prices over fixed periods.
The downside? You must manage rollover manually if you wish to maintain exposure beyond the contract’s life.
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Core Keywords
To ensure this content aligns with user search intent and SEO best practices, here are the primary keywords naturally integrated throughout:
- Perpetual futures
- Expiry futures
- Funding rate
- Futures contract
- Cryptocurrency derivatives
- Spot price
- Margin trading
- Contract settlement
These terms reflect common queries from both novice and experienced traders seeking clarity on advanced trading instruments.
Frequently Asked Questions (FAQ)
Q: Can I hold a perpetual future forever?
A: Yes, as long as your margin balance remains above the maintenance level and you’re not liquidated. There’s no time limit on holding perpetual contracts.
Q: Who pays whom in funding rate exchanges?
A: The direction depends on market sentiment. When longs dominate (driving price above spot), they pay shorts. When shorts dominate, they pay longs.
Q: Do expiry futures always settle at the spot price?
A: Not necessarily at spot, but at a settlement index—usually an average of prices across multiple exchanges—to prevent manipulation.
Q: Are perpetual futures riskier than expiry futures?
A: Not inherently. Risk depends more on leverage and position management than contract type. However, perpetuals expose traders to ongoing funding costs.
Q: How often are funding rates applied?
A: Typically every 8 hours (at 00:00 UTC, 08:00 UTC, and 16:00 UTC), though this varies slightly by platform.
Q: Can I hedge with both types of futures?
A: Absolutely. Both can be used to hedge spot exposure. Expiry futures offer precise time-bound hedging, while perpetuals allow dynamic, ongoing protection.
Final Thoughts
Both perpetual futures and expiry futures serve vital roles in the crypto derivatives ecosystem. Perpetuals offer unmatched flexibility and are favored by active traders, while expiry contracts provide clarity and predictability for time-specific strategies.
Understanding their mechanics—especially around funding rates and contract settlement—empowers traders to make informed decisions aligned with their objectives. Whether you're scalping volatility or hedging long-term holdings, choosing the right instrument can significantly impact your trading performance.
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