Perpetuals or "perps" and traditional futures contracts both allow traders to speculate on the future price of an asset without owning the underlying cryptocurrency, stock, or commodity.
While both give traders the option to take long or short positions and use leverage to increase their stake, one big difference sets them apart: traditional futures expire, while perpetual futures don't.
That key distinction fundamentally changes how contracts are priced and used by traders.
This guide compares perpetuals and traditional futures, explaining how they work, how they differ, and when traders typically use each.
(For more information, visit kalshi.com/perps.)
Feature | Perpetual futures | Quarterly futures |
|---|---|---|
Expiry | None | Every quarter |
Settlement | None | Cash settlement at expiry |
Price anchor | Funding rate | Arbitrage at expiry |
Rollover cost | None (funding is ongoing) | Basis spread paid at each roll |
Long-term holding | Funding cost accumulates | Clean single cost at roll |
Perpetuals v. Traditional Futures at a Glance
While both trading contracts provide exposure to future price movements, the difference lies in how exposure is maintained over the duration of the contract.
What are traditional futures?
A traditional futures contract is an agreement to buy or sell an asset at a predetermined price on a specific date in the future.
These contracts were developed to help buyers and sellers lock prices ahead of time, reducing uncertainty amid future market volatility.
As an example, a trader could purchase a September oil futures contract priced at $80 per barrel. By purchasing this contract, the trader is agreeing to buy the barrels at that price regardless of its true market price in September.
Futures contracts have a long history and have been used in a variety of markets. For example, farmers may use them to set a price floor for an upcoming crop harvest and airlines use futures to hedge oil and gas prices.
Crypto futures operate similarly, where traders may purchase a Bitcoin futures contract whose value rises and falls alongside Bitcoin's market price, without requiring a trader to own any Bitcoin itself.
Regardless, the defining characteristic of a traditional futures contract is its expiration date.
Expiration dates and settlement
Traditional futures contracts have predetermined and often standard expiration dates, the last day you can trade the contract. Popular expiration dates follow monthly or quarterly cycles, meaning that contracts expire near the end of each month or in March, June, September, and December.
When a contract expires, it then settles according to its agreed-upon terms.
In some cases, futures markets require physical delivery of the underlying asset upon settlement, while others use a cash settlement.
If a contract expires and is due to be settled with physical delivery, traders are paired to make or take delivery of an asset, typically of commodities like corn or oil.
More often though, contracts use cash settlements, meaning the difference or profit and loss is paid in cash at the conclusion of the contract.
Quarterly futures and rollovers
Traders that wish to maintain exposure to the underlying asset can roll their position into a new contract instead of closing it or allowing it to expire.
For example, if you're long June Bitcoin futures and anticipate it will rise after expiration of your contract, you may wish to close your position and buy September futures, essentially rolling your position forward.
When doing so, a trader may notice that there is a difference between the spot or market price of Bitcoin, and the pricing of the Bitcoin futures contracts. This difference is known as the basis, and can be positive or negative depending on variables like interest rates, leverage demand, and carrying costs.
In an example where Bitcoin is trading at $100,000 and futures contracts are priced at $102,000, the basis is $2,000.
Contango
If futures trade above the market price, like in the example above, the market is in contango.
Contango may arise when there is demand for long exposure to an asset, or broader market conditions and other financing costs lead to a premium.
As a result of the contango, traders rolling over their quarterly contracts end up experiencing what is known as negative roll yield, the product of rolling from lower priced futures to higher ones.
Backwardation
In other scenarios, the futures price may be lower than the asset's spot price. Suppose Bitcoin is trading at $100,000, but its futures are priced at $99,000. This would create a $1,000 negative basis and create a market condition known as backwardation.
When in backwardation, a market is signaling more near-term demand than future demand, meaning that those rolling their contract into the next quarter are moving from higher priced futures, to lower ones.
These key market conditions present opportunities to more advanced traders, who may seek to take advantage of the difference in spot and future prices via basis trading.
This pricing discrepancy manifests differently in perpetual futures, where there is no expiration date and a funding mechanism aims to keep the contract price near the spot price.
Perpetual futures: no expiration dates
Perpetual futures, often called perps or perpetual swaps, eliminate one of the biggest complexities of traditional futures contracts: expiration dates.
Much like quarterly or monthly futures, perps allow traders to speculate on the price of an asset without owning it.
However, since perpetual futures have no expiry, they do not require quarterly futures rollovers.
This means that traders do not need to worry about closing their positions before settlement or evaluating the basis and market conditions to maintain exposure. Instead, traders can keep their positions open indefinitely so long as margin requirements are met.
Without expiration though, perpetuals rely upon a funding mechanism in order to keep prices from veering too far from the market price of the underlying asset.
How the funding mechanism replaces expiration
While traditional futures bank on expiration and settlement to keep prices aligned, perps use periodic payments between long (think price is going up) and short (think price is going down) traders to keep futures prices in check with the spot price.
These payments, also known as funding rates, are exchanged between those who hold long and short positions.
When perpetual contracts trade above the spot market, funding is generally positive. This means traders who think the price is going up, or long traders, pay those who hold short positions, or think the price is going down.
This positive funding rate is designed to discourage excessive longing and encourage additional selling, ultimately bringing the perpetual contract back towards the spot price of the underlying asset.
If perpetual contracts are trading below the spot market, the opposite typically occurs. In that case, short traders pay those who are long, creating an incentive for buying which helps realign perps contract prices with market prices.
Funding payments occur on an automatic, recurring schedule set by the exchange. On Kalshi's CFTC-regulated platform, it happens three times a day for crypto perpetual futures, over 8-hour intervals at 12:00 AM ET, 8:00 AM ET, and 4:00 PM ET.
While funding rates do not guarantee the price is perfectly aligned at every moment, over time it encourages perpetual contracts to stay near the spot markets.
When to use quarterly futures versus perpetual futures
Perpetual and quarterly futures each have distinct advantages depending on a trader's expertise or goals. While perpetual futures dominate crypto trading volumes, quarterly and traditional futures are still widely used by those that find value in consistent and predictable settlement dates.
In some circumstances, traders may wish to invest in quarterly contracts because they want to hedge against future price actions, or engage in trading strategies like basis trading. Also, traditional and quarterly futures may better align with company reporting periods or more seasonal or cyclical commodity harvests.
On the other hand, perpetual futures may be better suited for those who want continuous market exposure and are actively trading. Though funding payments could add up in the long run, those with shorter holding periods may find them more appealing than rolling over traditional futures contracts.
Traders in the U.S. have historically not had regulated access to trading perpetuals, but now can gain access via Kalshi's CFTC-regulated platform, which allows traders to long or short 13 different crypto assets like Bitcoin, Ethereum, and Solana, with crypto perpetual futures contracts.
Why perps dominate crypto trading volumes
Perps have become a dominant force in crypto derivatives trading, with centralized exchanges eclipsing $86 trillion in perps volume in 2025.
Their growing popularity stems from their simplicity and continuous market access.
Unlike traditional futures, traders don't need to maintain expiration dates or manually roll their contracts over. For many crypto traders, the removal of those complexities may outweigh the cost of ongoing funding payments for holding perpetual futures contracts.
Frequently asked questions
Question | Answer |
|---|---|
Do perpetual futures have an expiry date? | No. Perpetual futures are designed without an expiration date. Instead of a fixed expiration like traditional futures, they use a funding mechanism to keep prices aligned with spot markets. |
Which is better: perpetual or quarterly futures? | Neither perps nor quarterly futures is naturally better than the other. However, depending on your trading interests one may be better suited for you. Perpetuals are generally simpler and well suited for active traders. While quarterly futures provide a more consistent, yet complex offering that may be better for institutional hedging or basis strategies. |
What happens when a futures contract expires? | When a traditional futures contract expires, it settles based on the contract's agreed-upon terms. Most often this is via cash settlement, which pays the profits or losses in cash. However, some settlements may require a physical delivery. |
How do you roll over a futures contract? | Traders wishing to extend their futures exposure can close their contract prior to expiry, and purchase later-dated contracts, essentially rolling over their exposure to the underlying asset. |
Conclusion
Both traditional and perpetual futures provide a vehicle to speculate on the future price of assets without owning them directly, but they grant exposure in different ways.
Traditional futures rely on expiration dates and fixed settlements, making them a preferred product for those using advance basis strategies or hedging. Meanwhile, perpetuals replace the fixed expiry with a funding mechanism that allows traders to gain indefinite exposure in a simpler way.
While neither product is inherently better than the other, the contracts offer different options to traders based on their goals and trading strategies.
(For more information, visit kalshi.com/perps.)
This is not financial advice. Trading on Kalshi involves risk and may not be appropriate for all. Members risk losing their cost to enter any transaction, including fees. You should carefully consider whether trading on Kalshi is appropriate for you in light of your investment experience and financial resources. Any trading decisions you make are solely your responsibility and at your own risk. Information is provided for convenience only on an "AS IS" basis. Past performance is not necessarily indicative of future results. Kalshi is subject to U.S. regulatory oversight by the CFTC.
