Referenced market
The derivative derives value from another market or asset price.
CRYPTO DERIVATIVES
PERPETUALS / MARGIN / LONG & SHORT
What is crypto derivatives trading?
Crypto derivatives are contracts that reference an underlying market. They can provide long or short exposure and may use collateral and leverage. Perpetual contracts are one of the most common forms in crypto and do not have a fixed expiry date.
DERIVATIVESPERPETUALSLEVERAGE RISK
DERIVATIVE BASICS
The contract tracks a market, but the position has its own mechanics.
Derivative traders should understand the referenced market as well as the contract's collateral, leverage, funding, liquidation and execution rules. Those mechanics can materially affect the outcome.
Long or short exposure
Contracts can allow directional positions without a conventional spot purchase.
Margin supports the position
Eligible collateral may be required before a leveraged derivative can be opened.
Exposure can be amplified
Leverage increases both potential gains and potential losses.
Holding cost can vary
Perpetual markets may use recurring funding payments.
Forced closure is possible
Positions can be liquidated when margin requirements are no longer met.
SPOT VS DERIVATIVE
The exposure model is different.
SPOT
Exchange the underlying asset.
ASSETDirect market transaction
A spot trade exchanges one asset for another.
LEVERAGENot inherent
Plain spot trading does not inherently require leverage.
EXPIRYNo contract expiry
The asset position itself is not a derivative contract.
DERIVATIVE
Trade a contract referencing the market.
EXPOSURELong or short
The contract can create directional market exposure.
MARGINCollateral may be required
Leveraged contracts use margin under the venue's rules.
RISKLiquidation can apply
Losses can trigger forced closure when margin is insufficient.
RELATED GUIDES
Go deeper into the mechanics.
DERIVATIVES FAQ
Quick answers.
What are crypto derivatives?+
They are contracts whose value references an underlying crypto market.
Are perpetuals derivatives?+
Yes. Perpetual contracts are derivatives without a fixed expiry date.
Can derivatives be leveraged?+
Yes. Supported markets may use leverage, which magnifies gains and losses and can create liquidation risk.
DERIVATIVES EDUCATION
Open HOODBTC Trade ↗Understand the contract before trading it.
Review market, collateral, leverage, funding and liquidation information before opening a derivative position.