Ventuals

What Are Perps? The ELI5 for Perpetual Futures

New to perps? Here's what perpetual futures are, how they work, and the one risk you need to understand — no jargon, no prior knowledge required.

By Emily Hsia·Updated

A paper futures contract with the 'Expiration Date' and 'Settlement' section cleanly torn off — symbolizing the defining feature of a perpetual future

Perpetual futures — usually just called perps — are one of those terms that sounds more complicated than the thing itself. If you've landed on the word and bounced off the jargon, this page is for you. We'll cover what a perp is, why it's weird, and what you actually need to know before you dig deeper.

If you want the full mechanics — funding math, liquidation formulas, history — head to what are perpetual futures?. This page is the plain-English version.

The short answer

A perp is a way to bet on whether something's price will go up or down, without actually owning the thing. You're not buying SpaceX shares or a Bitcoin — you're taking a position that tracks the price. If the price goes your way, you make money. If it doesn't, you lose money. And unlike a normal futures contract, a perp has no end date. You open it when you want, you close it when you want.

That's it. Everything else — funding rates, leverage, liquidations — is plumbing that exists to make that simple idea work.

A simple analogy

Imagine you and a friend are watching the live SpaceX valuation on a screen. You say it's going up. Your friend says it's going down. You agree to settle the difference continuously — every few hours, whoever is on the winning side gets paid a little, and the loser pays a little.

Neither of you owns a single SpaceX share. You're just keeping score.

The bet has no end date. Either of you can walk away at any moment and collect your winnings or eat your losses. And because no one owns anything, there's no "delivery" to worry about — it's purely about the price.

That's a perp. A platform like Ventuals is the referee: it matches you with someone on the other side and makes sure the scoreboard is always fair.

The three words you'll hear a lot

Three pieces of jargon do most of the work in perps-world. Here's what each one actually means.

No expiration. A regular futures contract expires on a set date — in March, in June, whenever. A perp doesn't. The contract just runs. You're the one who decides when to close it, by clicking "close" on whatever platform you're on. You can hold for five minutes or five months.

Funding rate. Since there's no expiry to force the perp's price back in line with the real thing, platforms use a small recurring payment between the two sides. If too many people are betting the price goes up, the "up" side pays the "down" side a little until the crowd evens out. It's a nudge, not a fee to the platform. Think of it as a tiny tax on crowding.

Leverage. Perps let you control a bigger position with less money. Put up $100 at 10x leverage and you're exposed to $1,000 worth of price movement. If the price goes up 10%, you make $100 — a 100% gain on your deposit. If it goes down 10%, you lose your entire $100. Leverage cuts both ways, and it cuts fast.

What perps are actually used for

Perps started in crypto around 2016, but the structure has spread. Today you'll find perps on crypto, on stock indices, and — newer — on pre-IPO companies like OpenAI, SpaceX, and Anthropic.

That last category is the interesting one. For most people, buying actual shares of a pre-IPO company is effectively impossible — the shares are restricted to accredited investors, the minimums are huge, and the transfers take weeks. A perp sidesteps all of that by giving you price exposure without ownership. You don't get on the cap table, you don't get shareholder rights, but you do get to participate in whether the valuation goes up or down. For a deeper look at that trade-off, see owning stock vs. price exposure and 3 ways to invest in unicorns as a retail investor.

The one risk that matters most

If you remember one thing from this page, make it this: leverage can wipe you out on an ordinary move.

At 10x leverage, a 10% move against you erases your entire deposit. At 20x, a 5% move does it. Price moves of that size happen regularly in every market perps trade on. When your deposit runs out, the position gets liquidated automatically — closed out by the platform — and you walk away with nothing.

Everything else — funding drift, platform risk, getting the direction wrong — is a real concern too, but leverage is the one that catches people off guard. Start small, start with low leverage, and treat the "100x available" number on any platform as a warning, not a target. The pillar guide covers the main risks in more detail.

The bottom line

A perp is a bet on a price, with no end date, settled continuously. That's the whole concept. The jargon — funding, leverage, liquidation — is there to make that simple idea work in practice, and to let you take bigger positions than your cash alone would allow. Once the basic idea clicks, the mechanics are just details.

When you're ready for the details, the full perpetual futures guide walks through how funding rates are calculated, what the mark and index prices are, how liquidations actually fire, and the history that brought perps from a 1992 academic paper to the pre-IPO market you can trade on today.

This article is for general informational purposes only and is not financial advice. It is not a recommendation or offer to buy, sell, or invest in any security, asset, or product. Always do your own research and consult qualified professional advisors before making investment decisions.

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