Guide
What are perpetual futures?
Perpetual futures, or perps, are futures contracts with no expiry date. You can go long or short and hold the position for as long as you like, and the contract’s price is kept close to the price of the asset it tracks: on most exchanges by a periodic funding rate paid between longs and shorts.
By Graybook · Published
Join WaitlistPerpetual futures, defined
A futures contract is an agreement to buy or sell an asset at a price agreed today. A traditional future has a delivery or settlement date: the December S&P 500 future stops trading in December, and anyone who wants to stay in the trade has to roll into March. A perpetual future removes that date. It is a derivative that tracks an underlying price (an index, a stock, a commodity, a coin or a currency pair) and can be held indefinitely.
Because nothing expires, a perpetual needs another way to stay tied to the market it follows. That is the one real design question in a perp, and the answer most exchanges use is the funding rate, explained below. Everything else works much like a future: you post margin, use leverage, and your profit or loss moves with every tick of the price.
Perpetual futures vs. traditional futures
| Perpetual futures | Traditional futures | |
|---|---|---|
| Expiry | None: the position runs until you close it | A set date each month or quarter |
| Rolling | Nothing to roll | Close the expiring contract and reopen in the next |
| Staying near the underlying | A funding rate on most venues (Graybook: a fixed upfront basis at entry) | Converges to spot as expiry approaches |
| Cost of holding | Funding paid or received each interval on most venues | Built into the price gap between contract months |
| Symbol | One symbol, e.g. NQ-PERP | One symbol per month, e.g. NQZ6 |
The contract specs can be identical. A perpetual on the E-mini Nasdaq-100 can use the CME contract’s $20-per-point multiplier and 0.25-point tick, so one tick is worth $5 either way. What changes is time: there is no expiry to plan around, no roll to pay for, and no gap between contract months on the chart.
How funding rates work
On most perpetual exchanges, the contract’s price is compared with an index price built from the underlying market. The difference, plus an interest component, sets the funding rate. At each funding time (often every eight hours, on some venues every hour) traders on one side pay traders on the other:
- When the perpetual trades above the index, funding is positive and longs pay shorts. That makes holding a long more expensive and pulls the price back down.
- When it trades below the index, funding is negative and shorts pay longs, pulling the price back up.
The payment is a percentage of the position’s value. At a funding rate of 0.01% per interval, a $10,000 position pays or receives $1 at each funding time. The rate changes every interval, so the cost of holding a perp on these venues isn’t known in advance; in a crowded market it can run far higher.
Index price, mark price, leverage and liquidation
Three prices matter on a perpetual. The last traded price is where the contract last changed hands. The index price is the underlying market’s price, usually from one or more official sources. The mark price is what the venue uses to value open positions and margin, typically anchored to the index so that a brief spike in the contract alone doesn’t close positions.
Perps are traded on margin. With 10x leverage, $1,000 of margin controls $10,000 of exposure, and a 1% move in the underlying is a 10% change in the margin. If losses use up the margin, the position is closed: on an exchange that is a liquidation. Leverage limits differ by asset; volatile coins usually get less than stock indices or major currency pairs.
Where perps came from
The idea is older than crypto. The economist Robert Shiller proposed perpetual futures in 1992, as a way to create derivatives markets for assets that are hard to trade directly, such as housing. The contract found its market in 2016, when the crypto exchange BitMEX launched a bitcoin perpetual swap with a funding rate. Perps became the most traded instrument in crypto derivatives, and economists have since studied how their prices track the underlying (see the NBER paper in the sources).
Perps beyond crypto
The same contract works on any market with a reliable price. Perpetuals now exist on stock indices, single stocks, commodities and currencies, which brings two things crypto traders take for granted to traditional markets: no expiry, and trading when the underlying exchange is closed. Graybook’s 500+ perpetual contracts are grouped in five books:
How Graybook prices perpetual futures
Graybook has no funding payments. Instead it uses a fixed upfront basis, priced off the forward curve: at execution, the entry price is quoted with a small built-in forward basis that reflects current market borrow and capital costs. The cost of carrying the position is locked in the moment you enter, so holding overnight or over a weekend adds no running charge, and every tick moves your P&L by a known dollar amount.
Each contract tracks one underlying, priced on the official feeds of 8 exchanges. Graybook trades 24/7: when the underlying market closes for the night, the weekend or a holiday, its perpetual keeps trading and can drift with the flow. When the market reopens, the perpetual is re-anchored to the official exchange price, so any drift is undone in one move. The knowledge base explains re-anchoring in detail.
The risks
- Leverage cuts both ways. A small move in the underlying is a large move in your account.
- Gaps. When a market reopens after a close, the price can jump. On Graybook a stop that the re-anchor jumps past fills at the re-anchored price, so a loss can be larger than the stop.
- Funding on other venues. Where funding applies, a position that looks profitable can lose money to funding over time.
- Liquidity and volatility. Smaller markets move faster and fill less predictably.
Trading perps with a prop firm
A perpetual futures prop firm gives traders a funded account to trade perps without putting their own capital in the market. Graybook is a perpetual futures prop firm: you pay a one-time fee for a simulated account, trade it under one set of written rules, and are paid a share of the profit.
- Evaluation: pass a 10% profit target within a 5% static max loss, then you’re funded with an 80% profit split.
- Rapid: funded from day one, with no profit target, a 4% static max loss and a 90% profit split.
Every account is simulated: you never risk your own funds in the market. The full terms are in the program rules.
Questions
What is a perpetual future in simple terms?
A futures contract with no expiry date. You can hold a long or short position for as long as you like, and the contract's price is kept close to the price of the asset it tracks.
What is the difference between perpetual futures and regular futures?
Regular futures expire on a set date and have to be rolled into the next contract to keep a position open. Perpetual futures never expire, so there is nothing to roll; instead, a mechanism such as a funding rate keeps their price near the underlying.
What is a funding rate?
On most perpetual exchanges, a periodic payment between longs and shorts that pulls the perpetual's price toward the underlying. When the perpetual trades above the underlying, longs pay shorts; when it trades below, shorts pay longs.
Does Graybook charge funding payments?
No. Graybook has no funding payments. Each entry price includes a small fixed upfront basis reflecting current market borrow and capital costs, so the cost is known and locked in when you open the position.
What can you trade as a perpetual future?
Perps started in crypto, but the same contract now exists on stock indices, single stocks, commodities and currencies. Graybook lists perpetuals on index futures, commodities, U.S. stocks, crypto and forex.
What is a perpetual futures prop firm?
A proprietary trading firm whose traders trade perpetual futures. You pay a one-time fee for a simulated account, trade it under the firm's risk rules, and are paid a share of the profit. Graybook is a perpetual futures prop firm.