A perpetual future, usually shortened to “perp”, is a derivatives product without an expiration date that tracks the price of an underlying asset such as BTC or SOL. You do not own the coin. You post collateral, take price exposure in either direction, and the venue settles profit and loss in the collateral currency. Because there is no expiration date to pull the contract back to the spot price, funding payments do that job instead: a periodic fee paid by one side of the contract to the other side.
This guide defines each part of that sentence, works through small examples, and names the venue rules you need to read before any number becomes real. If you already know the definition and want a side-by-side cost comparison with buying the coin, read spot vs perpetual futures instead.
The definition, piece by piece
Hyperliquid’s contract specification states it directly: its perpetuals “are derivatives products without expiration date” and “rely on funding payments to ensure convergence to the underlying spot price over time.” That one sentence contains the three ideas a beginner needs.
- Derivative: the contract’s value comes from another price, called the underlying. On Hyperliquid, the underlying is the venue’s oracle index of the spot asset.
- No expiration: a dated future settles on a fixed date, which forces it toward the spot price at expiry. A perp never settles on a date, so a position can stay open as long as its margin holds.
- Funding: a periodic payment between longs and shorts that pushes the contract price toward the reference price.
A long position gains when the price rises. A short position gains when it falls. Both are the same contract in opposite directions, which is why the same instrument lets a trader express either view.
How funding keeps a perp close to spot
Hyperliquid’s funding page describes the rate as “a periodic fee that is paid by one side of the contract (either long or short) to the other side.” When the contract trades above the oracle price, the rate is positive, “and the long position will pay the short position.” When it trades below, the rate turns negative and shorts pay longs. Holding the more crowded side becomes more expensive, which encourages positions on the other side and narrows the gap.
The interval is a venue rule, not a universal constant. Hyperliquid’s documentation says “The funding rate on Hyperliquid is paid every hour.” For consistency with centralized exchanges, its interest rate component is predetermined at 0.01% every 8 hours, which is 0.00125% every hour; the premium component moves with the gap between contract and oracle prices. Many other venues settle every eight hours or on contract-specific schedules, so always read the interval beside the rate.
A rough cost example, with an assumed rate that stays fixed purely to keep the arithmetic visible: a $10,000 long position paying 0.00125% per hour pays $10,000 × 0.0000125 = $0.125 per hour. Over one day that is $10,000 × 0.0000125 × 24 = $3 in funding, and over 30 days it would be $3 × 30 = $90. Real rates change every interval and can reverse sign, so record each settlement rather than extending one quote. The funding-rates guide shows how to build that ledger.
Collateral, leverage and linear P&L
A perp position needs margin rather than the full position value. Hyperliquid documents that “The margin required to open a position is position_size * mark_price / leverage.” Its perps are linear contracts: one contract is one unit of the underlying, and profit and loss are paid in the collateral currency.
For a linear contract the price result is simple:
- long P&L = size × (exit price − entry price)
- short P&L = size × (entry price − exit price)
Worked example with invented prices. SOL is $150. A trader opens a 1 SOL long at 5× leverage, so the initial margin is 1 × $150 ÷ 5 = $30.
| Price later | Long 1 SOL | Short 1 SOL | Long result on $30 margin |
|---|---|---|---|
| $165 | 1 × (165 − 150) = +$15 | −$15 | +50% |
| $135 | 1 × (135 − 150) = −$15 | +$15 | −50% |
The price moved 10% either way: 15 ÷ 150 = 0.1. On the $30 of margin, the same $15 is 15 ÷ 30 = 0.5, or 50%. Leverage did not change the dollar move on the position; it changed how much collateral sat behind it. The long vs short P&L guide adds fees and funding to this result.
Liquidation: when collateral runs out
Every perp position has a maintenance requirement. Hyperliquid’s liquidation page states that “A liquidation event occurs when a trader’s positions move against them to the point where the account equity falls below the maintenance margin.” The venue then tries to close the position in the order book.
Continue the example under a stated assumption: an isolated 1 SOL long with $30 of margin and a 4% maintenance fraction. Equity at price p is 30 + (p − 150), and maintenance is 0.04 × p. They meet when 0.96 × p = 120, and 120 ÷ 0.96 = 125, so the simplified threshold is $125. That is a fall of 150 − 125 = $25 from entry, before fees and funding change the margin. On a real venue the maintenance fraction depends on the asset and its tiers, so this is arithmetic for learning, not an estimate for any live position. Crypto liquidation explained walks through the venue rules in detail.
Three prices on one screen
Perp screens show more than one price, and they answer different questions.
- Last trade: the most recent match on the venue’s own order book.
- Oracle or index price: a reference built from spot markets. On Hyperliquid, the “Oracle price is used to compute funding rates.”
- Mark price: a robust composite that, on Hyperliquid, “is used for margining, liquidations, triggering TP/SL, and computing unrealized pnl.”
The practical consequence is that a brief wick in the last trade may not move the mark price far, while a slow drift in the mark can reach a liquidation threshold. The mark, index and last price guide reproduces a fictional calculation.
Common first misunderstandings
“A perp is a different coin.” It is a contract about the coin’s price. Nothing is delivered.
“No expiry means I can hold for free.” Funding is a recurring payment that can be larger than trading fees for a position held for weeks.
“My stop is my liquidation price.” A stop is an order you choose; liquidation is the venue closing a position because margin fell below its requirement. They follow different rules.
“Shorts are only for experts.” A short is the same contract in the other direction. Its risk is shaped differently: a long’s price loss stops if the asset reaches zero, while a short’s price loss keeps growing as the price rises until margin rules intervene.
Before you use a perp
The CFTC’s virtual-currency advisory notes that virtual currencies are more volatile than traditional fiat currencies and that profits and losses related to this volatility are amplified in margined futures contracts; that general warning does not replace a venue’s contract documentation. Before relying on any example here, read the current contract specification, funding page and margin rules for the exact market you use, and confirm the interval, maintenance tiers and price references. The beginner mistakes guide turns those checks into a short pre-trade list.
Educational material only. Examples use invented prices and assumed rates; they are not quotes, forecasts or recommendations.