Independent educational resource
Perpetual contracts and funding
A plain-language explanation of leveraged derivative exposure.
A derivative is not the underlying asset
A perpetual contract provides price exposure under contract rules without a conventional fixed expiry date. Holding such a position is not the same as owning the referenced asset. Collateral, funding, valuation and liquidation rules determine how the position behaves.
Funding payments
Funding is a mechanism that can create payments between opposite sides of a market. Depending on the rate and position direction, a trader may pay or receive funding. Rates can change; a previously favourable rate is not a promise of future income.
Leverage magnifies sensitivity
Leverage allows notional exposure to exceed posted collateral. It increases sensitivity to adverse price moves and costs. For illustration, a 1% adverse move on 1,000 units of notional exposure represents roughly 10 units before fees and other effects; liquidation cannot be inferred from that simple example alone.