- Both futures and perpetual swaps are derivative contracts that allow traders to get exposure to the future price action of an underlying asset.
- Both allow you to easily trade into long and short positions and take advantage of leverage.
- The key difference between these two is how their prices are "tied" to their underlying assets:
Future
A future has an expiration date and traders with a position at settlement will have their positions closed at the price of the underlying index at the expiration date. (Details are available in contract specifications.) In most cases, the price of a futures contract will track the value of the underlying index with a spread that shrinks as the expiration date approaches.
Perpetual Swap
A perpetual swap does not expire and so in order to keep prices of the swap close to the price of the underlying market, a funding payment is calculated every 8 hours and it is transferred between traders with long positions in the swap and traders with short positions. ACDX does not receive any funding. If the swap price has generally been higher than the underlying index over a recent period, long traders will pay short traders the funding amount. This should have a downward effect on the price as traders would prefer to be short and receive the funding payment. You can read more about perpetual swap funding here.
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