A perpetual contract is a derivative product that is similar to a traditional Future Contract but has no expiry or settlement. Perpetual contracts mimic a margin-based spot market and hence trade close to the underlying reference Index Price.

Similar to spot trading, traders post on the order book at what price they want to buy or sell.

The major difference is that they can make use of leverage and need to decide on whether to go long or short.

Leverage on AAΧ can be up to 100x, traders can decide on how much leverage they want to use depending on their investment strategy.

In the futures market, traders are able to profit from both betting for and against the market.

By acquiring long contracts on an asset indicates a trader is confident the value of an asset is going to increase. Traders can also bet against the market by going short, if he or she anticipates the value of the asset is going to drop.

Futures contracts allow traders to hedge the market by having an offsetting number of futures contracts. When there is a gain from the futures contract, there is always a loss from the spot market, or vice versa. With such a gain and loss offsetting each other, the hedging effectively locks in the acceptable, current market price.

Trader can exit the market by closing the position. When the position is closed the Profit and Loss (PnL) will be realized. Closing a position is achieved by taking a trade in the opposite direction of existing position.

Did this answer your question?