Key Differences

Perpetual futures are innovative financial derivatives with no expiration or settlement date, unlike traditional contracts, which have a fixed delivery date. For example, traditional contracts for commodities like wheat or gold require physical delivery or receipt of the asset at expiration, incurring costs such as storage fees or price volatility risks.

In traditional contract markets, prices often diverge from spot prices due to holding costs and time to expiration. The longer the time to expiration, the greater the price uncertainty and divergence from spot prices.

Perpetual futures combine the benefits of futures markets (no physical delivery) with spot market behavior, keeping prices closely aligned with spot prices. Unlike traditional contracts, which may have persistent price gaps, perpetual futures use a funding rate mechanism to ensure long-term price convergence, enhancing trading efficiency and market fairness.


Core Concepts of Perpetual Futures

Mark Price

To prevent market manipulation and align perpetual futures prices with spot prices, LBank uses a mark price to calculate unrealized profits and losses. The mark price is based on spot market prices and relevant indices, ensuring fairness and transparency.

Initial and Maintenance Margin

  1. Initial Margin: The minimum capital required to open a position.

  2. Maintenance Margin: The minimum capital needed to maintain a position. If the margin falls below this level, forced liquidation may occur, potentially incurring fees.

💡Tip: Traders should monitor margin levels and close positions proactively to avoid liquidation risks and costs.

Funding Rate

The funding rate balances long and short positions in the perpetual futures market, ensuring prices align with spot prices:

  1. Positive Funding Rate: Longs pay shorts.

  2. Negative Funding Rate: Shorts pay longs.

⚠️ The funding rate adjusts periodically based on market supply and demand, promoting market stability.

Leverage and Risk

Perpetual futures allow traders to use leverage to trade beyond their capital, amplifying potential profits but also risks. As technology advances, leverage ratios have increased, requiring careful risk management.


LBank’s Risk Management and Safeguards

LBank protects traders and the platform through:

  1. A strict margin management system to ensure sufficient capital levels.

  2. Dynamic funding rate adjustments to maintain market stability.

  3. Transparent price data and risk warnings to support informed trading decisions.