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Futures
In both traditional and decentralized finance, futures markets serve as the primary venue for asset price discovery and to establish, hedge and transfer risk.
Hxro offers Perpetual Futures and Expiring Futures:
Perpetual Futures
Perpetual futures (or "perps"), as the name implies, are futures contracts that have no exact expiration date.
The contract maintains its peg to the price of the underlying asset through a very short-term funding rate that is applied to open positions in the contract at specific intervals (intervals can range from 1 hour to several hours depending on the exchange implementation).
In standard implementations, if the average mark price of the Perp is above the cash index price of the underlying asset for the hourly funding period, opened long positions pay short positions an hourly "funding rate". If the average mark price of the Perp is below the cash index price of the underlying asset, short pay longs.
The funding rate is generally determined by the magnitude of the difference between the average Perp mark price and the cash index price at the end of each funding period.
While Perp futures are a powerful way to access liquidity on the front-end of the curve, it does little on its own to help bolster liquidity at medium and longer duration. This is where a term- structured expiring futures begin to play a critical role.
Expiring Futures
Expiring futures are linear derivative contracts that are used for price-discovery and risk transfer that settle to the price of the underlying asset at a specific date and time in the future. It is standard for futures markets to list multiple contracts at consecutive intervals (often weekly, monthly, and quarterly). As there are multiple contracts listed on one underlying asset, each with a different expiration, futures create what is known as a "term structure" or futures curve. Futures curves greatly expand the ways market participants can hedge future cash flows and express a forward-looking view on underlying asset prices.
It is the combination of liquid perps and expiring futures, along with the ability to instantly move positions across contracts, that properly builds an efficient and tradable curve.
Last modified 4mo ago