Perpetual futures are derivative contracts that let you trade an asset's price without owning the asset and without a scheduled expiration date. You can go long to gain from a rise or short to gain from a fall. The collateral supporting that position is called margin.
Suppose you put $100 of margin behind a Bitcoin trade. A small price move can produce a much larger gain or loss relative to that margin, while funding and fees change how much you keep when you close.
Often shortened to perps, these contracts let you keep that exposure open while the position meets margin requirements and the market remains available. On Pariflow, the trade comes down to four numbers: position size, margin, funding rate and liquidation price. Let's follow one Bitcoin position from entry to exit to see how they work together.
Why Traders Use Perpetual Futures
Perps serve two common purposes:
- Take a directional view. A long benefits when the price rises; a short benefits when it falls. Both can lose money when the market moves the other way.
- Hedge existing holdings. A Bitcoin holder can open a short to offset some of the impact of a price decline without selling their Bitcoin.
There is no routine expiry forcing you to move into a later contract. That flexibility comes with an ongoing funding cost or credit and the need to maintain enough collateral.
Follow One Bitcoin Position
Suppose Bitcoin trades at $100,000 and you open a long representing 0.01 BTC:
- Entry notional: 0.01 × $100,000 = $1,000.
- Initial margin: $100.
- Entry leverage: $1,000 ÷ $100 = 10×.
You have $1,000 of exposure backed by $100 of margin. You have not bought 0.01 BTC to withdraw to a wallet.
For this linear contract:
Long P&L = quantity × (exit price − entry price)
A rise to $102,000 produces 0.01 × $2,000 = $20 of gross profit. A fall to $98,000 produces a $20 gross loss. Either outcome represents 20% of the initial margin, before costs.
Increasing leverage while keeping the same position size leaves dollar P&L unchanged; it reduces the collateral supporting the trade. Using the same $100 to open a larger position increases both potential profit and potential loss.
All prices and rates in this example are hypothetical. We assume the position stays open through 72 hourly funding payments, then closes at the stated price.
Funding: The Cost of Holding
Without an expiry settlement to pull a perp toward its underlying price, funding helps keep the two aligned. It changes the incentive to hold each side:
A positive rate makes holding a long more expensive; a negative rate makes holding a short more expensive. This encourages price alignment but does not guarantee that the perp and spot prices always match. The rate is not a prediction of the next price move.
Pariflow funding settles hourly. The market's Overview shows the current rate and time to the next payment. For a linear position, each payment uses the position's mark value:
Funding payment = quantity × mark price × hourly funding rate
Return to our 0.01 BTC long. Suppose the mark stays at $100,000 for three days and funding stays at +0.01% per hour:
- Each payment: $1,000 × 0.0001 = $0.10 paid.
- After 24 payments: $2.40 paid.
- After 72 payments: $7.20 paid.
Bitcoin has not moved, but funding has consumed 7.2% of the initial $100 margin. In practice, both the rate and the position's mark value change, so the total is the sum of the actual payments.
Funding received can offset costs. It cannot protect a position from a larger price loss. Funding paid reduces the margin buffer and can move liquidation closer even when price is flat.
Closing the Trade: What You Actually Keep
After those 72 payments, suppose Bitcoin rises to $102,000 and you close the long. The $20 price gain is only the first part of the result.
Use an illustrative trading fee of 0.12% on each fill:
- Opening fee: $1,000 × 0.12% = $1.20.
- Closing fee: $1,020 × 0.12% ≈ $1.22.
- Net P&L: $20.00 − $7.20 − $2.42 = $10.38.
Amounts are rounded to cents for readability; the net result is calculated from the unrounded amounts.
- Open a 0.01 BTC long$100,000 entry price · 10× leverage$100 margin
- Hold through 72 funding paymentsFlat mark price · +0.01% each hour−$7.20
- Close after Bitcoin rises 2%$102,000 exit price · gross price P&L+$20.00
- Account for both trading feesIllustrative 0.12% on each fill−$2.42
- Net profit after funding and fees
- +$10.38
Opening requires the $100 margin plus the opening fee: $101.20 in this example. Returning your margin when you close is not additional profit. Use the Est. fees shown on the Pariflow ticket for the applicable market; the example's fee is not a promise of a fixed rate for every instrument.
The calculation assumes fills at exactly the stated prices. Spread and slippage can change your execution prices and therefore the result.
What Happens If the Price Falls?
Before costs, a fall to $98,000 leaves our long with $80 of equity: $100 margin minus a $20 unrealized loss. Funding debits reduce that buffer further.
Maintenance margin is the minimum equity needed to keep a position open. If equity reaches the maintenance requirement, liquidation closes the position. The trade can end before your expected recovery arrives.
Pariflow uses mark price to value a position and determine liquidation. The last traded price is the latest completed trade; the oracle price is the underlying price reference. Those numbers can differ, and none guarantees the price of an exit fill.
At 10×, a 10% adverse move would mathematically consume the initial margin before costs. Liquidation normally happens sooner, because maintenance margin requires a remaining buffer. Use the liquidation price shown for your position and monitor changes after funding or margin adjustments.
Pariflow positions use isolated margin: collateral is assigned to each position. A liquidated position can lose all its assigned margin; it does not automatically draw on the rest of your balance. Adding margin commits more funds to that position. A stop-loss can provide an earlier exit, but fast markets and execution delays can affect the fill.
Hedging Bitcoin Without Selling It
Suppose you hold 0.1 BTC worth $10,000 at a Bitcoin price of $100,000. You want to reduce short-term downside exposure while retaining the coins, so you open a separately funded short perp representing 0.1 BTC.
If both spot and the perp move to $90,000:
- Your Bitcoin holdings lose $1,000 in value.
- Your short gains 0.1 × ($100,000 − $90,000) = $1,000 before costs.
The price effects offset in this simplified example. Fees, funding and differences between spot and perp prices prevent a perfect real-world offset.
The hedge also gives up upside while it is active. If Bitcoin rises instead, gains on the coins are offset by losses on the short. Those spot gains do not automatically support the short's isolated margin. The short can be liquidated unless its own collateral remains sufficient.
Perps, Spot and Prediction Markets
Choose the product around the exposure you want:
- Spot: Own Bitcoin. Your asset value moves with its price; fully paid, unborrowed holdings do not have margin liquidation.
- Perpetual futures: Trade Bitcoin's ongoing price movement, long or short, with margin and funding.
- Dated futures: Trade a contract with a scheduled expiry; continuing the exposure may require rolling into another contract.
- Prediction markets: Trade a defined event, such as whether Bitcoin closes above $100,000 at a particular time.
For a typical binary prediction contract, the correct outcome pays $1 and the incorrect outcome pays $0. Its price can be read as an approximate implied probability. A Bitcoin perp quote is a price, not a probability.
Our guides to prediction markets and reading market odds explain that event-based payoff.
Before Your First Pariflow Perp Trade
On the perpetual markets page, open a market and check:
- Size and direction: Long or short, quantity and total notional.
- Margin and liquidation: Assigned collateral, leverage and the current liquidation estimate.
- Holding cost: Hourly funding rate and the next payment time.
- Execution cost and exit: Estimated fees, order type and take-profit or stop-loss levels.
Pariflow perps use cash funds; promotional bonus funds cannot cover margin or fees. Check the available account mode and market status before placing an order.
Frequently Asked Questions
Do perpetual futures expire?
They have no scheduled expiry. Liquidation or a market closure can still end a position.
Is a perpetual future the same as owning Bitcoin?
No. A BTC perp gives price exposure through a derivative. It does not give you Bitcoin to withdraw.
Can I lose money if Bitcoin's price stays unchanged?
Yes. Funding paid and trading fees can produce a net loss even when your entry and exit prices match.
Examples use simplified linear contracts and hypothetical prices. Check the current market terms and costs before trading.
Artem Goryushin
Fintech expert, business analyst
Artem is a fintech expert and business analyst with experience in prediction markets and financial analytics.