Perpetual futures contracts explained

A perpetual futures contract – a "perp" – is an agreement to trade an asset's price with leverage that never expires. You never own the coin; you hold a position whose value tracks the price of BTC, ETH or another market, and you can keep that position open for as long as you have enough margin. Perps are the most-traded product in crypto because they let you go long or short, use leverage, and hedge without ever moving the underlying asset.

What a perpetual futures contract actually is

A traditional futures contract has a delivery date. On that date the contract settles at the asset's price and disappears. A perpetual contract removes the date. Instead of settling once, it stays open indefinitely and uses a small recurring payment between traders – the funding fee – to keep its price anchored to the real market.

In practice that means three things:

• You trade the price of an asset, not the asset. Opening a 1 BTC long does not put a bitcoin in your wallet.

• You post margin (collateral) rather than the full value of the position. The ratio between position size and margin is your leverage.

• You can hold the position for an hour or six months. The only thing that can close it other than you is liquidation, which happens if your margin runs out.

Perps vs spot vs dated futures

Spot is simplest: you buy a coin and own it. Dated futures (which ZMO also offers – see time-based futures contracts) are useful when you want to lock in a price for a specific date. Perps sit in between: all the flexibility of futures, none of the expiry admin.

The four numbers that matter on a perp

1. Leverage and margin

Leverage lets you control a position worth more than the margin you put up. At 10x leverage, $100 of margin controls a $1,000 position. Leverage does not change how much the market moves; it changes how much each move is worth to you – in both directions. A 5% price move on a 10x position is a 50% change in your margin. The leverage guide covers how to pick a sensible multiple.

2. Mark price and index price

Perps use two prices. The index price is the average spot price across several large exchanges. The mark price is derived from the index and is what ZMO uses to calculate your unrealised profit and loss and to decide whether you get liquidated. Using the mark price rather than the last traded price stops a single aggressive order on one exchange from liquidating people unfairly. Full detail: index price and mark price.

3. Funding fee

Because a perp never expires, nothing forces its price back to spot. Funding does that job. Every eight-hour funding interval, traders on the crowded side of the market pay a small fee to traders on the other side. When the perp trades above spot, longs pay shorts, which nudges the price down; when it trades below, shorts pay longs. Funding is paid between traders – ZMO does not keep it. See funding fees explained.

4. Liquidation price

This is the mark price at which your margin can no longer cover your losses. If the market reaches it, ZMO closes your position automatically. Higher leverage means a liquidation price closer to your entry. It is the single most important number to know before you open a trade; the liquidations guide explains how it is calculated and how to keep it far away.

A worked example: a 10x long over 24 hours

Say you believe BTC will rise. BTC is trading at $60,000.

• You open a long of 0.1 BTC – a position worth $6,000.

• You use 10x leverage, so you post $600 of USDT as margin.

• Your liquidation price is roughly $54,500 (about 9% below entry, slightly less than the 10% implied by 10x because of the maintenance margin requirement).

Over the next 24 hours BTC rises 3% to $61,800.

• Unrealised profit: 0.1 BTC × ($61,800 − $60,000) = +$180.

• That is a 30% return on your $600 margin from a 3% move in the market.

• Funding: three intervals pass, each at a rate of 0.01%. You are long and longs are paying, so you pay 3 × 0.01% × $6,000 = $1.80 in total.

• Trading fees on entry and exit are charged on the full $6,000 position value, not the $600 margin – see futures trading fees.

Now flip it. If BTC had instead fallen 3% to $58,200, you would be down $180 – 30% of your margin – and another 6% drop would liquidate you. Same market move, same leverage, opposite outcome. That symmetry is the whole point of understanding perps before trading them.

How to trade a perpetual contract on ZMO

The full walkthrough with screenshots is in how to make your first futures trade. The short version:

1. Complete identity verification and transfer funds from your spot wallet to your futures wallet.

2. Open the Futures tab and choose a market – for example BTC-PERP.

3. Set your leverage. New traders should start at 2x–5x, not the maximum.

4. Choose a margin mode: isolated limits your risk to the margin assigned to this position; cross lets your whole futures balance support it.

5. Pick an order type (market or limit), enter the size, and set a take-profit and stop-loss before you confirm. See take-profit and stop-loss orders.

6. Monitor the position's mark price, liquidation price and unrealised PnL from the Positions panel.

Common mistakes

• Treating leverage as free upside. It multiplies losses identically. Most liquidations come from using 20x or more on a first trade.

• Watching the last price instead of the mark price. Your PnL and liquidation are calculated on mark price. They can differ during volatile moments.

• Forgetting funding on long holds. At 0.01% three times a day the cost is small; at 0.1% during a hot market, a position held for weeks can lose several percent to funding alone.

• Not setting a stop-loss. A perp will sit open until it is closed or liquidated. A stop-loss turns "closed by liquidation" into "closed where I decided."

• Using cross margin without understanding it. Cross margin can protect a position from liquidation by drawing on your whole balance – which also means one bad trade can drain the whole balance.

FAQ

Do perpetual futures ever expire? No. A perpetual contract has no settlement date. It stays open until you close it or it is liquidated.

Do I own any Bitcoin if I hold a BTC perpetual long? No. You hold a contract whose value tracks the price of BTC. However, while profits and losses are paid in the contract's default settlement currency, you can change it to BTC.

Who receives the funding fee? Other traders. Funding is a transfer between long and short position holders. The exchange does not keep it.

Can I lose more than my margin? In isolated margin mode your maximum loss is the margin assigned to that position; ZMO's liquidation process and insurance fund are designed to close positions before they go negative. In cross margin mode a losing position can draw on your full futures wallet balance.

What's the difference between a perpetual and a quarterly futures contract? A quarterly contract settles on a fixed date and its price converges to spot as that date approaches. A perpetual has no date and uses funding to stay near spot instead.

Is perpetual futures trading suitable for beginners? It can be, at low leverage and with a stop-loss in place. Start with the leverage guide, make your first trade at 2x–3x, and increase only once you have seen how mark price, funding and liquidation behave in a live position.