Calculate your futures and perpetual contract PnL, ROE, and liquidation prices. Understand your leverage exposure and manage risk effectively.
Have an expiration date when the contract settles. Price can deviate from spot price due to time value (contango/backwardation).
No expiration date - can hold indefinitely. Uses funding rate mechanism to keep price close to spot. Funding paid/received every 8 hours typically.
Pro Tip: Perpetuals are most common in crypto. Check funding rates before opening positions - high positive rates mean longs pay shorts.
// Position Value
Position = Margin × Leverage
// Return on Equity (ROE)
ROE = (PnL / Margin) × 100%
// Liquidation Distance
% to Liquidation = (Entry - Liq) / Entry
ROE amplifies your returns (and losses) by the leverage factor. 10x leverage means 10% price move = 100% ROE.
| Leverage | Liquidation Distance | 5% Move = ROE | Risk Level |
|---|---|---|---|
| 2x | ~50% | ±10% | Low |
| 5x | ~20% | ±25% | Moderate |
| 10x | ~10% | ±50% | High |
| 20x | ~5% | ±100% | Very High |
| 50x+ | ~2% | ±250%+ | Extreme |
* Liquidation distance varies by exchange and margin mode. Cross margin liquidation is further from entry price.
Longs pay shorts. Market is bullish/overleveraged long. Consider shorting or waiting for better entry.
Shorts pay longs. Market is bearish/overleveraged short. Longs get paid to hold position.
Normal: ±0.01% per 8h (~0.03%/day)
Elevated: ±0.05% per 8h (~0.15%/day)
Extreme: ±0.1%+ per 8h (~0.3%+/day)
Warning: Funding can significantly impact PnL over time. At 0.1% per 8h, you'd pay/receive ~1% daily or ~30% monthly!
Leverage trading carries substantial risk of loss and is not suitable for all investors. You can lose more than your initial margin. Past performance is not indicative of future results.
Only trade with capital you can afford to lose completely.
Futures trading lets you bet big with small capital. That's the appeal. Put down $1,000, control a $10,000 position. If you're right, profits multiply. If you're wrong? You can lose everything in minutes. More traders blow up their accounts with leverage than any other way. But used carefully, futures and perpetuals are powerful tools. You can profit when prices fall, not just rise. You can hedge existing holdings. You can take positions you couldn't afford outright. The key is understanding exactly how liquidation works, what funding rates will cost you, and why that 100x leverage button is almost always a bad idea.
Futures have expiration dates. Buy a March Bitcoin future, and it settles in March at whatever price was agreed. Prices can trade above spot (contango) or below (backwardation) based on market sentiment. Perpetuals never expire. You can hold forever. To keep prices close to spot, they use funding rates: when perp price is above spot, longs pay shorts every 8 hours. When below, shorts pay longs. This keeps things in line. Perpetuals dominate crypto trading. Way more volume than spot markets on most exchanges. They're what most people mean when they say 'trading futures.' For most traders, perps are the main tool. Regular futures matter more for hedging specific dates or if you have a view on whether the market is in contango or backwardation.
