Delivery Futures vs Perpetual Futures: What Are the Differences?

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A delivery futures contract refers to a virtual asset futures contract that specifies the delivery date. In other words, a delivery futures contract will be delivered and settled by two sides at a predetermined price on a specified delivery date. Perpetual futures lack a pre-specified delivery/expiration date, and can thus be held indefinitely until the positions are manually closed by users themselves or liquidated due to insufficient margin.

The key features and key differences:

(1) Delivery/Expiration date

From a design perspective, the core difference is that, unlike delivery futures, perpetual futures do not have delivery/expiration dates. Traders can hold their perpetual futures as long as they desire unless their positions are liquidated.

(2) Price anchoring system

As the price of perpetual futures is anchored to the spot prices of their underlying assets, unlike delivery futures, they are less likely to suffer from liquidation due to malicious price spikes. While the price of delivery futures generally stems from the orderbook on its own exchange and is usually affected by the "Buy 1" and "Sell 1" prices on the order book.

(3) Clawback mechanism

Many exchanges implement the "Clawback Mechanism" for delivery futures, that is, even if users' positions have not been closed in time and been bankrupt due to violent market fluctuation, and the margin assets cannot cover the margin call losses, then all profitable users in the current period shall share the losses proportionally.

While, perpetual futures will lower the market risks through Auto-Deleveraging, and no margin call losses will incur. Users can close their positions and withdraw their profits at any time after opening positions.

(4) Maximum leverage

Perpetual futures support up to 125x leverage, while delivery futures only support up to 20x leverage, therefore, the perpetual futures have higher risks and opportunities for speculations.

(5) Funding Rate for perpetual futures

Since each delivery futures contract has an expiration/delivery date, its futures contract price moves toward and eventually equals its spot prices as the delivery date approaches. While perpetual futures do not have expiration dates

Due to the absence of expiration dates in perpetual futures, exchanges introduce a price anchoring system called the funding fee mechanism to maintain fairness for trades. When the price difference between the perpetual futures price and its spot price derivates from a reasonable range, the funding fee mechanism will forcibly drive the contract price to a reasonable level.

When the price of the perpetual contract is significantly higher than the spot price, thus, traders who are long pay for short positions. Conversely, the perpetual price is below the spot price, short positions pay for longs. The larger the price difference, the higher the funding rate.