Perpetual Futures

The perpetual future provides indefinite, leveraged delta exposure to a specific asset.

Perpetual futures are no-expiration futures that are subject to Funding. They are ideal for traders that want continuous delta exposure, without selecting an expiration.

They were invented in 1992 by economist Robert Shiller. More than 95% of all derivatives volume in cryptocurrency markets today can be attributed to perpetual futures.

Specification

Perpetual futures on Everstrike are priced, margined and settled in evUSD. As with all perpetual futures, they are cash-settled (no physical delivery of the underlying asset takes place). The settlement takes place at the time of closing a position.

Settlement	Cash
Expiration	Perpetual
Pricing Currency	evUSD
Margin Currency	evUSD
Settlement Currency	evUSD
Funding	Hourly
Funding Interval	1h
Max. Funding Rate	0.3%
Funding Period	10h

Equivalence with Perpetual Options

A perpetual futures contract is functionally equivalent to a perpetual call option with strike price zero (identical payoff function). Funding for perpetual futures works in the exact same way as funding for perpetual options.

Funding

Funding-based derivatives (perpetual futures, perpetual options, power perpetuals) are subject to Funding. Funding is an hourly exchange of money between longs and shorts.

• Positive Funding Rate: Longs pay shorts.

• Negative Funding Rate: Shorts pay longs.

Funding (Long) = -Funding Rate * Position Size

Funding (Short) = Funding Rate * Position Size

Funding takes place during the first five seconds of each hour. During this time, Everstrike takes a snapshot of all user positions, and debits/credits the margin balance of each user, according to the formula above.

​Funding Rate

To calculate the Funding Rate, first calculate the Premium:

Premium = ((Mark Price - Index Price) / Index Price)

Next, calculate the Base Funding Rate:

Base Funding Rate = Max(dampener, Premium) + Min(dampener, Premium)

Where dampener is a pre-defined constant (0.03 for futures and 1.00 for options).

Finally, calculate the Funding Rate:

Funding Rate = Base Funding Rate * (Funding Interval/Funding Period)

Funding Period

The Funding Period on Everstrike is 10 hours.

​Funding Interval

The Funding Interval on Everstrike is 1 hour.

Settlement

Perpetual futures are cash-settled. Settlement on Everstrike takes place immediately after closing a position. Once the trader closes a position, the P/L from the position is credited to the trader's cash balance. This happens automatically, within one second of closing the position.

Expiration

Perpetual futures do not expire.

Additional Notes

• Trading is disabled during the first ten seconds of each hour.

• The hourly Funding Rate is capped at 0.3%.

Example 1

The trader buys a BTC perpetual futures contract for $23,000. ​ One month later, the price of the contract is $24,000. The trader has paid a total of $100 in funding. The total profit of the trader, should he decide to sell his futures contract, is the current price of the contract, minus his initial purchase price, minus any funding that he has paid so far ($24,000 - $23,000 - $100 = $900). If he does decide to sell his futures contract, this amount will be automatically credited to his balance. ​

Example 2

The trader buys a BTC perpetual futures contract for $23,000. ​ One month later, the price of the contract is $22,800. The trader has received a total of $500 in funding. The total profit of the trader, should he decide to sell his futures contract, is the current price of the contract, minus his initial purchase price, minus any funding that he has paid so far ($22,800 - $23,000 + $500 = $300).