First, the short version.
A perpetual—usually shortened to perp—is a trading contract linked to a reference price. That price might come from an index, a stock, or a crypto asset. You trade the contract rather than buy the underlying asset.
Unlike a dated futures contract, a perp has no scheduled expiry. That does not promise that you can hold it forever: margin requirements, market closures, and the provider’s rules still apply. Vest’s contract introduction.
What are “long” and “short”?
Long means taking the side that benefits from a rising contract price, before costs. Short means taking the side that benefits from a falling price, before costs. Either side can lose money if the market moves against it.
Imagine a contract linked to a fictional company’s stock. If its price rises, a long can gain and a short can lose. Neither position makes you a shareholder. This is a simplified explanation, not a trading result or an instruction to take a position.
A few words you’ll keep seeing.
- Underlying: the asset or market the contract refers to.
- Exposure: how much a change in price affects your position.
- Margin: money or collateral supporting the position.
- Leverage: exposure that is larger than the money supporting it.
- Liquidation: a forced close under the provider’s margin rules.
- Funding: periodic payments connected to holding a perp position.
A smaller margin requirement does not make the exposure smaller. If you take a large position with little margin, a relatively small adverse move can consume that margin. Margin and leverage explained by Vest.
Why does funding exist?
Funding is part of the mechanism intended to keep the contract price near its reference. You may pay or receive it. The rate, direction, and settlement schedule matter; they are not a fixed return. Vest’s funding explanation.
What should I read next?
If you know futures, start with futures vs index perps. If you know stocks, read shares vs stock perps. Then learn about funding, fees, and leverage before considering a provider.