Perpetual futures let you hold a leveraged position on an asset’s price for as long as you want, with no expiry date. You choose the leverage, and going short works the same way as going long.
Each of those features comes with a cost: funding payments for as long as you hold a position, and liquidation risk that grows with your leverage. Here’s what you get, and what you give up for it.
Perpetual futures vs. options vs. dated futures
Feature | Perpetual futures | Options | Dated futures |
|---|---|---|---|
| Expiry | None | Fixed | Fixed |
| Leverage | You choose | Built into the premium | Set by the contract |
| Time decay | None | Yes (theta) | None |
| Strike price | Not needed | Required | Not needed |
| Cost of holding | Funding payments | Premium paid up front | Rolling to a new contract at expiry |
| Going short | Same as going long | Through puts or spreads | Same as going long |
| Maximum loss | Your margin, and more in a fast market | The premium, when you buy | Your margin, and more in a fast market |
Each structure handles time differently. Options charge up front through the premium, and that value wears away as expiry gets closer (theta). Dated futures make you deal with expiry on a schedule and pay to roll into the next contract. Perps drop the calendar but replace it with a funding payment that changes over time. Because it never shows up as one big charge, it’s easy to underestimate.
The benefits, and what each one costs
Hold a view without a calendar
There’s no expiry date, so there’s no rollover cost and no price gap to deal with when one contract ends and the next begins. If you’re not sure how long your idea will take to play out, you don’t have to guess at a settlement month.
The trade-off is funding, the recurring payment between long and short traders that keeps a perp’s price close to the asset’s price. It keeps charging for as long as you hold. Over weeks, it adds up no matter what the price does, and it raises the move you need just to break even.
Hedge a position without selling it
You can offset a position’s price risk while keeping the asset itself. That keeps your original cost and your reason for owning it intact.
The trade-off is that the hedge is leveraged, so it can be liquidated if the price moves against it, and a liquidated hedge stops protecting you right when you need it. Taxes can get messy too. Gains and losses on the hedge and the asset may not offset neatly, which can leave you with a tax bill on a trade that was only meant to protect you.
Choose your own leverage
You size your position to the exposure you actually want, instead of being stuck with fixed contract sizes.
The trade-off is that leverage sets how much room you have. The higher it is, the smaller the price move needed to liquidate you, and doubling your leverage roughly halves that move. The same exposure built at low leverage with more margin survives a much bigger swing than it would at high leverage with less.
Take a straight directional bet
A perp is a straight bet on whether the price goes up or down. There are no greeks to manage, no time decay, and no strike price to pick and defend. If you only care about direction, you’re not paying for features you won’t use.
The trade-off is losing the defined risk of buying an option. When you buy an option, you know your worst case the day you buy it: the premium. With a leveraged perp, your worst case depends on where your liquidation price sits and how fast the market gets there.
Short as easily as you go long
Going short works the same way as going long. You don’t need to borrow the asset first, and there’s no risk of that loan being recalled mid-trade.
The trade-off is the shape of the risk. A price can only fall to zero, but it can keep rising, so an unhedged short has no natural limit on losses. A sharp rally can close the gap to your liquidation price faster than most declines would for a long position. And if shorts are paying funding at the time, you’re carrying an open-ended risk and a recurring cost at once.
Trade around the clock
Perps trade 24/7, so you can react to weekend headlines and overnight news as they happen, without waiting for a market to open.
That’s also the trade-off. There’s no closing bell and no forced pause to reassess. A leveraged position can be liquidated at 3:00 am, and prices can gap on thin overnight or weekend trading, jumping straight past your liquidation price before you can react.
Who perpetual futures aren’t for
Perps work best for active traders who can keep a close eye on leveraged positions. They tend to be a poor fit if:
You can’t monitor your positions. Markets run around the clock and liquidation can happen at any time, so perps assume you, or a system you trust, are watching. Set-and-forget is the approach they punish most.
Your idea needs months to play out. Funding makes long holds expensive, so you can be right about the direction and still lose money.
You can’t afford to lose your full margin. With leverage, losing all the margin behind a position is a realistic outcome, not a remote one.
What Canadian traders should know
They sit outside registered accounts
Perps can’t be held in a Tax-Free Savings Account (TFSA) or a Registered Retirement Savings Plan (RRSP), so every gain lands in a taxable account. With no tax shelter, the return that matters is the one after tax.
Active trading is likely business income
Frequent, speculative trading in derivatives is often treated as business income rather than capital gains. According to the Canada Revenue Agency (CRA), that can make your gains fully taxable instead of taxed at the capital gains inclusion rate. At the dollar amounts leverage can produce, that difference adds up. The CRA looks at factors like how often you trade, your intent, and how long you hold, so it’s worth getting a professional opinion.
USD margin, Canadian-dollar life
Many perps are margined and settled in U.S. dollars, while your spending, taxes, and net worth are in Canadian dollars. That adds currency risk on top of price risk, for both the margin you post and the funding you pay. You can be right about the direction and still see the result shift once it’s converted to CAD.
