What Are Perpetual Futures (Perps)?
A perpetual future is a derivative that tracks a spot price but never expires. How perps work, why funding exists, and what actually happens when you open one.
The one-sentence version
A perpetual future (a perp) is a contract that tracks the price of something without ever settling. You can hold it for five minutes or five years. Nothing forces it to close.
Why that is unusual
A traditional future has an expiry date. On that date the contract settles against the spot price, and that forced convergence is what keeps the two prices tied together. Remove the expiry and you remove the mechanism. A contract that never settles has no structural reason to track anything.
Perps solve this with a recurring payment instead of a deadline. If the perp trades above spot, longs pay shorts. If it trades below, shorts pay longs. The payment is called funding, and it makes holding the expensive side of the trade cost money every hour. That ongoing cost is what pulls the contract back toward spot.
What you are actually posting
You do not buy the underlying asset. You post margin (collateral, in USDC) and take on exposure to price movement. Leverage is simply the ratio between that exposure and the margin backing it. At 10x, a 1% move against you erases 10% of your margin.
Because your margin is finite, there is a price at which it runs out. That is the liquidation price, and the exchange closes the position there to stop your account going negative. Everything about risk management on perps reduces to one question: how far away is that price, and what would it take to get there?
Mark price vs last price
Liquidations are not triggered by the last trade. They are triggered by the mark price, which on Hyperliquid is derived from an oracle aggregating several major venues. This matters more than it sounds: if liquidations followed the last trade, anyone with enough size could push a thin book through a cluster of stops and collect. Oracle marking makes that attack far more expensive.
What perps are good for
Three things, mostly. Taking a directional position without holding the asset. Shorting something you do not own. And hedging: holding spot while shorting the perp leaves you flat on price but still collecting or paying funding, which is the basis of the cash-and-carry trade.
What they cost
Three separate costs, and traders routinely forget the second and third. Trading fees on entry and exit. Funding, charged every hour you hold. And slippage: the gap between the price you saw and the price you got, which grows with your size relative to the book.
Related reading: how funding rates are calculated, and the difference between cross and isolated margin.
Last updated 2026-09-24