What is the difference between a quarterly future and a perpetual future?

Contract Expiration Mechanics

1. Quarterly futures have a fixed expiration date, typically aligned with calendar quarters—March, June, September, and December.

2. At expiration, all open positions are settled in cash or physical delivery depending on the underlying asset and exchange rules.

3. Traders must actively manage positions ahead of expiry to avoid automatic settlement or rollover complications.

4. Liquidity often concentrates in the front-month contract, with diminishing volume in farther-dated quarters.

5. Settlement price is usually derived from a time-weighted average of spot prices during a predefined window before expiry.

Funding Rate Mechanism

1. Perpetual futures incorporate a funding rate system that periodically exchanges payments between long and short holders.

2. Funding occurs every 8 hours on most major platforms and adjusts based on the spread between the perpetual contract price and the underlying index price.

3. When the perpetual trades at a premium, longs pay shorts; when it trades at a discount, shorts pay longs.

4. This mechanism anchors the perpetual’s price close to the spot market, preventing sustained divergence.

5. Funding rates are transparently published and calculated algorithmically, often using a median of multiple spot feeds.

Leverage and Margin Behavior

1. Both instrument types support variable leverage, but perpetuals often allow higher maximum leverage tiers due to continuous trading design.

2. Initial margin requirements for quarterly contracts may increase as expiry approaches, especially during high-volatility events.

3. Perpetual margin models frequently include auto-deleveraging protocols triggered when liquidation queues exceed available counterparty equity.

4. Quarterly contracts require position rollover planning, introducing potential slippage and basis risk during transition periods.

5. Isolated and cross-margin modes function identically across both instruments, though default settings vary by platform interface.

Market Structure Implications

1. Perpetuals dominate daily trading volume on crypto derivatives exchanges, often accounting for over 80% of total notional turnover.

2. Quarterly futures serve institutional hedgers seeking precise exposure duration and predictable settlement timelines.

3. Arbitrageurs continuously monitor the basis between perpetuals and quarterlies to exploit mispricing across time horizons.

4. Exchange listing policies differ: Binance and Bybit prioritize perpetual listings, while Deribit maintains deeper quarterly order books for BTC and ETH.

5. Regulatory scrutiny has intensified around perpetual funding mechanics, particularly concerning negative rate cascades during extreme market stress.

Common Questions

Q: Can I hold a perpetual future indefinitely?Yes, provided sufficient margin is maintained and no forced liquidation occurs. No expiration forces closure.

Q: Why do some traders prefer quarterly futures despite lower liquidity?They offer cleaner delta-neutral hedging for known time windows and eliminate funding cost uncertainty inherent in perpetuals.

Q: How is the funding rate calculated on BitMEX-style perpetuals?It uses the formula: Funding Rate = (Index Price − Mark Price) / Index Price × (1 / Funding Interval), where interval is 3 per day.

Q: Do quarterly futures ever trade at a premium to spot?Yes, especially during bullish contango environments where demand for longer-dated leverage exceeds supply, pushing forward prices above current spot levels.