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Futures exist so you can trade a price view without always buying and holding the physical or spot asset. What you trade is not a bag of oil or a coin in a wallet — it is a contract: a standardized agreement whose value tracks an underlying (a commodity, index, crypto pair, etc.). The exchange (or clearing house) defines the contract’s size, tick, margin rules, and how it settles. You buy and sell contracts on an order book with the same limit and market orders as spot; the economics of holding them are different. Two families matter:
  1. Delivery futures — contracts with an expiry (physical or cash settlement against an underlying)
  2. Perpetual futures — contracts with no expiry; continuous exposure, kept near the underlying with funding (widely used in crypto; the design is general)

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What is a position?

A position is your open commitment in a contract after trades fill:
  • Long — you bought contracts you have not fully closed; you profit if the contract price rises
  • Short — you sold contracts you have not fully closed; you profit if the contract price falls
You open a position by trading (increasing size). You close or reduce it by trading the other way. Until you close, margin is at risk and mark-to-market P&L moves with the contract price. Spot “I hold 2 BTC” is inventory; futures “I am long 2 contracts” is a derivative stake, not ownership of the underlying itself.

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Why delivery futures appeared

Spot is “pay now, get the asset now.” Producers and consumers often needed the opposite timeline: agree a price today, settle later. That started as forward deals — for example grain to arrive in Chicago months after harvest, or oil and other commodities delivered on a fixed schedule. Informal forwards were later standardized into exchange-traded futures (a famous early case: Chicago Board of Trade grain contracts in the mid‑1800s). The idea is the same everywhere: lock a price at moment A, take delivery (or cash-settle) at a later date B.

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Why perpetual futures exist

Delivery contracts force rolls (close the expiring month, open the next). A perpetual keeps continuous exposure without an expiry. The modern perpetual swap — high leverage, continuous trading, and a funding mechanism — was popularized in crypto by BitMEX in 2016. The idea of a non-expiring future has older academic roots (e.g. Shiller, 1992), and earlier experiments existed, but that BitMEX-style design is what most people mean by “perps” today: a powerful hedging tool, and also a default vehicle for high-leverage speculation. In many markets, dated futures still dominate (rates, equity indices, commodities on traditional exchanges). In crypto, perpetuals usually carry most of the derivatives volume.

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Shared ideas: leverage and open interest

Whether delivery or perpetual: Long / short vs spot buy / sell:
  • Spot buy / sell usually moves inventory of the asset
  • Futures long / short changes your position in the contract — exposure and margin P&L, not a warehouse of oil or a bag of the underlying

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How a trade changes OI (and volume)

Every trade has two sides. Volume always rises by the traded size (both sides are the same match). OI only changes when the match opens or closes positions market-wide — not when risk just transfers from one holder to another. So: volume measures activity; OI measures how much open risk is still out there. High volume with flat OI often means positions are passing hands, not growing.

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Linear vs inverse

Futures also differ by how margin and P&L are denominated — especially common language in crypto, but the same design choice exists wherever contracts are coin-margined vs cash-margined.

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Linear (quote-margined)

Linear contracts are margined and settled in a stable quote currency (often USDT / USD).
  • You think in dollars of P&L for a given move in the underlying
  • If you are long and price rises by $1,000, profit scales roughly linearly with size × price change (in quote)
  • Example product style: BTCUSDT perpetual or dated future — margin in USDT, P&L in USDT
This is the default mental model for most “USDT futures” books.

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Inverse (base- / coin-margined)

Inverse contracts are margined and settled in the underlying asset itself (e.g. BTC), while the contract is often quoted in USD.
  • You post coin as margin; wins and losses show up as more or less coin
  • P&L in coin is not linear in price the way USDT P&L is: the same dollar move changes coin P&L differently at different price levels (because settlement is tied to the inverse of price)
  • Classic crypto example: early BTCUSD coin-margined perps (BitMEX-style) — trade a USD notional, settle in BTC
Inverse products let venues and traders stay in-asset (no stablecoin balance required) and historically simplified pure-crypto settlement.

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Side by side

Both linear and inverse can be perpetual or delivery. “Linear vs inverse” is about settlement currency and P&L shape; “delivery vs perpetual” is about expiry and how price is anchored (basis vs funding).

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Delivery futures

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Basis and convergence

Basis is the gap between the futures price and the underlying (spot or index) price — roughly futures minus underlying (venues may phrase it as premium/discount). Near expiry, well-functioning delivery or cash-settled contracts are pulled toward the underlying: convergence. If futures trade rich or cheap vs spot for too long, arbitrage (cash-and-carry style) and delivery or settlement rules squeeze that gap. Other contract details (physical vs cash settle, tick size) vary by market. The dated nature and basis → convergence story is what separates delivery futures from perps.

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Perpetual futures

Perps never expire, so there is no delivery date to force convergence. Instead, venues use funding (and related price definitions) to keep the perpetual close to the underlying.

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Funding rate

Funding is a periodic payment between longs and shorts:
  • If the perp trades above the target (rich), longs typically pay shorts — incentivize selling the perp / being short
  • If the perp trades below the target (cheap), shorts typically pay longs — incentivize buying the perp / being long
Over time that tug-of-war keeps perpetual price near the asset without an expiry. Funding is not primarily an exchange fee; it is a peer transfer (venues still charge trading fees separately).

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Index price and mark price

When you hear “kept to the underlying,” think: index defines the target, funding nudges the perp toward it, mark protects liquidations from noise.

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Quick comparison

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In MarketLens

Venues MarketLens covers list spot, linear and inverse perps, and delivery contracts alongside each other. Multi-market views can mix those types — see classic order flow and L2 order book. See also: Spot markets, Prediction markets.