What is the difference between contract trading and perpetual contracts of OKEx?

Contract trading, with fixed expiration dates, stands distinct from perpetual contracts, which offer indefinite position holding and cash settlement.

Oct 28, 2024 at 11:28 am

1.Contract Trading

Contract trading involves the buying and selling of standardized contracts representing the underlying asset, such as a cryptocurrency. Each contract has specific terms, including its size, expiration date, and settlement price. Traders can take both long and short positions in these contracts, allowing them to potentially profit from both rising and falling markets.

2.Perpetual Contracts

Perpetual contracts are similar to traditional futures contracts but without a fixed expiration date. They allow traders to maintain positions indefinitely, rolling over to the next trading day at a funding rate. Perpetual contracts provide greater flexibility compared to traditional contracts, as traders can hold positions for extended periods without worrying about expiration dates.

3.Key Differences Between Contract Trading and Perpetual Contracts

• Expiration Date: Contract trading has fixed expiration dates, while perpetual contracts do not.
• Settlement: Contract trading involves the physical delivery of the underlying asset upon expiration, while perpetual contracts are settled in cash.
• Funding Rate: Perpetual contracts have a daily funding rate that incentivises traders to maintain a balanced market.
• Flexibility: Perpetual contracts offer greater flexibility, allowing traders to hold positions indefinitely.
• Traded on different markets: Contract trading is found on Futures Market, while Perpetual contracts are found on Swap Market.
• Higher Leverage: Usually perpetual contracts offer higher leverages than futures contracts.
• Smaller Price Fluctuation: Perpetual contracts have smaller price fluctuation than futures contracts.

4.Which Type of Trading is Right for You?

The choice between contract trading and perpetual contracts depends on individual trading preferences and strategies.

Contract trading may be more suitable for traders who prefer fixed expiration dates and physical settlement of the underlying asset.

Perpetual contracts may be more appropriate for traders seeking greater flexibility, the ability to hold positions indefinitely, and exposure to a wider range of underlying assets.

Ultimately, it's crucial to consider your trading objectives, risk tolerance, and market knowledge before deciding on the most suitable trading option.