> ## Documentation Index > Fetch the complete documentation index at: https://docs.marketlens.app/llms.txt > Use this file to discover all available pages before exploring further. # Futures Markets > Delivery futures and perpetual futures — leverage, long/short, open interest, basis, funding, index and mark price. 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](/spot-markets); 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) ### 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. ## 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**. ## 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. ## Shared ideas: leverage and open interest Whether delivery or perpetual: | Idea | Meaning | | ---------------------- | -------------------------------------------------------------------------------------------------------------------------------------- | | **Leverage** | Control a larger notional with less margin. Gains and losses on the position scale with notional; liquidation risk rises with leverage | | **Open interest (OI)** | Total size of **open positions** market-wide (outstanding contract interest) | | **Volume** | Size that **traded** (matched) over a period — every fill counts | **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 ### 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. | Trade (one match) | OI | Volume | | -------------------------------------------------- | ----------------- | ----------------- | | New **long** + new **short** | **+** traded size | **+** traded size | | Close **long** + close **short** | **−** traded size | **+** traded size | | Close **short** + open **short** (short transfers) | **no change** | **+** traded size | | Close **long** + open **long** (long transfers) | **no change** | **+** traded size | 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. ## 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. ### 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. ### 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. ### Side by side | | Linear | Inverse | | ----------------- | ------------------ | -------------------------------------- | | **Margin** | Quote (e.g. USDT) | Base / coin (e.g. BTC) | | **P\&L unit** | Quote | Base | | **P\&L vs price** | \~Linear in quote | Nonlinear in coin (inverse of price) | | **Typical name** | BTCUSDT, ETHUSDT | BTCUSD (coin-margined), ETHUSD | | **Why use it** | Simple dollar P\&L | Stay in the asset; no quote stablecoin | 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). ## Delivery futures ### 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. ## 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. ### 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). ### Index price and mark price | Price | Role | | --------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | **Index price** | Reference for the **underlying** — often a basket of spot (or related) prices across venues, so one thin book cannot alone define “true” value | | **Mark price** | Fair value used for **unrealized P\&L and liquidations** — usually blends index with the contract market so a single wick on the last trade does not unfairly liquidate positions | | **Last / mid** | What you see trading on **this** book right now | When you hear “kept to the underlying,” think: **index** defines the target, **funding** nudges the perp toward it, **mark** protects liquidations from noise. ## Quick comparison | | Spot | Delivery futures | Perpetual futures | | ---------------------- | ------------------------------- | --------------------------------- | -------------------------- | | **Expiry** | None | Yes | None | | **Exposure** | Own the asset | Dated derivative | Continuous derivative | | **Leverage** | Usually limited / borrow | Common | Common, often high | | **Long / short** | Buy / sell (short needs borrow) | Native long & short | Native long & short | | **Keeps price honest** | Spot supply/demand | **Basis → convergence** at expiry | **Funding** + index / mark | ## 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](/classic-order-flow) and [L2 order book](/order-book). See also: [Spot markets](/spot-markets), [Prediction markets](/prediction-markets).