Perpetual futures explained: what you own and owe

Short answer: A perpetual futures contract is an agreement whose value follows a coin’s price, with no expiry date. You do not own the coin. You own a position, supported by collateral you set aside, and that position carries continuing obligations: enough margin to keep it open, and funding at scheduled times that you may pay or receive. The position ends when you close it, when the exchange closes it because your collateral can no longer support it, or when the exchange ends the contract itself.

What do you actually own in a perpetual futures contract?

Not the coin. A futures contract is an agreement tied to the price of an asset, and in a perpetual that agreement has no end date, so nothing settles by itself.

Whether a futures contract ever delivers the underlying asset depends on the contract. The US Commodity Futures Trading Commission puts it plainly: a customer who buys a virtual-currency futures contract “may not be entitled to receive the actual virtual currency, depending on the particular contract”, because under most contracts offered, customers pay or receive the dollar equivalent of the coin’s value (CFTC customer advisory: Understand the Risks of Virtual Currency Trading).

So read the contract specification for the exact instrument you trade. It states what is delivered, in which asset profit and loss is settled, and who holds your collateral.

A fully paid spot purchase is different. You pay the whole price, the coin is credited to your account, and holding it requires nothing further: no counterparty to pay on a schedule and no collateral level to maintain. That does not remove every risk. If the coin sits on an exchange, the exchange holds it, and its terms and its solvency stand between you and the asset.

Two separate things follow from a futures position, and they are worth keeping apart:

The position. Exposure to price movement. It can be long (you gain if the price rises) or short (you gain if it falls). You do not need to own the coin to open either side.
The collateral. The asset you set aside to support the position. On many exchanges that is either a stablecoin such as USDT — a contract usually labelled linear — or the coin the contract tracks, in which case the contract is usually labelled coin-margined. The label names the asset standing behind the position, not how risky that position is. Which asset it is, and who holds it, comes from the contract terms and the exchange’s custody arrangements — not from the coin the contract tracks.

Owning a BTC perpetual does not give you bitcoin. Holding USDT as collateral does not make the position a USDT investment either; it makes USDT the asset that absorbs your losses first.

Spot, dated futures and perpetuals: how do they differ?

Question	Fully paid spot purchase	Dated futures contract	Perpetual contract
What do you hold?	The coin, credited to your account	A contract with a set end date	A contract with no expiry date
Do you own the underlying coin?	Yes, subject to who holds it	No, unless its terms provide delivery	No
Does it end by itself?	No; you hold it until you sell	Yes, at expiry, under its settlement terms	No; you close it, or the exchange ends it
Scheduled payments while open?	None	None from funding	Funding, paid or received at set intervals
Collateral level to maintain?	No	Yes, if the position is leveraged	Yes
Can losses exceed what you put in?	No more than you paid for the coin	Yes, with leverage, per contract terms	Yes, with leverage, per contract terms

The perpetual’s defining feature is the missing expiry. Because there is no settlement date, the contract needs another way to stay close to the spot price, and on most crypto exchanges that mechanism is the funding rate.

“No expiry” is often read as “no deadlines”. The accurate reading is that the position can stay open indefinitely, while the obligations attached to it repeat on a schedule.

A dated contract does end on its own, but ending is not the same as delivering. What happens at expiry — a cash payment or delivery of the asset — is set by that contract’s terms, not by the fact that it is a futures contract.

What does margin secure, and what is notional?

Notional is the full value of the position at the current price. Margin is the collateral set aside to support it. Leverage is the ratio between the two.

Leverage is what makes the notional larger than the collateral. Many exchanges let you choose it when you open a position, so it behaves like a setting rather than a fixed feature of futures — but the choice is not the whole story. The contract’s rules and the exchange’s margin rates decide how much collateral the position actually requires and how much exposure it carries. At 5x, the notional is five times the initial margin. At 1x, the two can be the same amount.

Initial margin is what you must put up to open the position. Maintenance margin is the minimum you must keep to hold it. If losses take your collateral below that level, the exchange can close the position for you — a liquidation. Binance futures liquidation covers how that closure works and what moves the trigger price.

A clearly hypothetical linear USDT contract, to separate the two numbers:

Notional: 1,000 USDT
Leverage: 5x
Initial margin: 200 USDT
A 1% move in the underlying price: 1% × 1,000 = 10 USDT, before fees and funding

That 10 USDT is measured against the notional, not against the 200 USDT you posted. The same move is 1% of the position and 5% of the initial margin. This is arithmetic on an assumed contract. It is not a maximum loss and not a liquidation-price formula: maintenance margin rates, other positions in the same account, fees and funding all change the real numbers, and the exchange can close the position before your collateral reaches zero.

The direction of the risk matters more than the size of the example. The CFTC warns that losses in leveraged virtual-currency trading can exceed the amount you invested (CFTC customer advisory).

Does no expiry mean no ongoing obligations?

No. The recurring obligation is funding: periodic payments transferred between traders holding opposite sides of the same perpetual contract. Funding is not always a cost. You can pay it or receive it, depending on the rate and your side.

Binance’s funding FAQ states the direction: when the funding rate is positive, longs pay shorts; when it is negative, shorts pay longs. It gives the calculation as funding amount = nominal value of positions × funding rate, where nominal value = mark price × size of a contract. Mark price is the exchange’s calculated reference price for the contract, which can differ from the last traded price (Introduction to Binance Futures Funding Rates).

On the same 1,000 USDT notional, a funding rate of 0.01% gives a payment of 1,000 × 0.0001 = 0.10 USDT. A long pays that amount at a positive rate and receives it at a negative rate. The figure is arithmetic on an assumed rate, not a forecast of the next payment.

Funding is not an exchange commission. The same FAQ says Binance does not charge a fee on funding payments, because they move directly between traders on opposing sides. Trading fees are paid to the exchange for executing your order; funding is a transfer between traders for holding the position. Both change what you keep, and funding can change it in either direction. See maker vs taker fees for the execution side.

On timing, the FAQ says the default interval is every eight hours, that intervals are specified per contract and can be updated, and that you are liable only if you hold an open position at the funding time. It also notes a 15-second deviation in the actual transaction time. Read the interval and countdown displayed for your contract rather than assuming eight hours, and do not treat closing seconds before a timestamp as a reliable way to avoid a payment.

The Binance FAQ and the CFTC advisory are educational material, and either may lag the rules in force today. The contract specification for the instrument you trade governs: interval, rate limits, collateral asset, margin rates and settlement.

How does a perpetual position end?

It does not end by itself, because there is no expiry date. A position typically closes in one of these ways:

You close it with your own order, at whatever price the market gives you.
The exchange closes it through liquidation, when your collateral can no longer support the position.
The exchange ends the contract, by delisting it or closing positions under its rules, with or without your action.

The third case is not exotic. An exchange can change a contract’s terms or end the contract under its own rules, and neither step needs your agreement. Your exit plan should cover it, because it is not under your control.

Planning the exit before entry is part of the position, not an afterthought — including the case where the market moves faster than your order fills.

What should you check before opening a perpetual position?

Which asset is collateral, and who holds it. Check the contract specification and the exchange’s custody terms. This is separate from the coin the contract tracks.
Notional, initial margin and maintenance margin. Write down all three. The notional sets your profit and loss; the maintenance margin sets how much room you have.
The funding interval and current rate for this contract. Use the displayed countdown and rate, not a default assumption. Note which side pays at a positive rate and which receives.
Trading fees on entry and exit. These are charged by the exchange and are separate from funding.
Settlement and delisting terms. How the contract settles profit and loss, and what the exchange may do to the contract itself.
Your exit before you enter. The price at which your idea is wrong, and how that level sits relative to liquidation.
The amount you can lose. Leverage changes how much collateral a position needs; it does not make a planned loss smaller, and with leverage the loss can exceed the margin you posted.

What this means for your capital

A perpetual contract gives you price exposure with repeating obligations and no automatic end. The coin is not yours, the collateral is at work supporting a position, and funding moves between traders for as long as the position is open — sometimes out of your account, sometimes into it.

We run Cointrapper, a private, invite-only algorithmic trading pool on Binance. Participants invest USDT into the pool’s shared accounts and hold units — shares that record their part of the pool. They do not hold individual futures positions of their own, and the pool is not a bot running on a participant’s exchange account; the instruments and terms are discussed in writing before anyone commits.

Futures trading and pooled investing are high risk. Your entire investment can be lost, and capital is not insured. Nothing here is individual investment advice, and exchange rules, margin rates and funding intervals change — check the current contract specification before trading.