The Internet offers over 500 crypto platforms that provide different tools that help make a profit in this unstable market. One of the most challenging and complicated trading methods is futures. Like with traditional finances, crypto futures are all about speculation and value prediction. However, that is not about guessing, but about analyzing and in-depth understanding of this market. To grasp how crypto futures work, let us delve into the types of contracts utilized by traders.
Variety of Crypto Contract Trading
Let’s delve into some of the most prevalent forms:
- Perpetual contracts, devoid of an end date, grant investors the liberty to hold them indefinitely. These agreements are meticulously designed to closely mirror the spot price of crypto by utilizing a funding mechanism. It ensures that the price remains aligned with the spot rate, rendering perpetual agreements favored for long-term trading or hedging.
- Quarterly contracts, also referred to as fixed-term agreements, encompass predetermined expiration dates, usually occurring every 3 months. These agreements are popular within traditional futures markets, enabling investors to speculate on the price within a specific time frame.
- Calendar futures contracts combine multiple quarterly agreements that have different expiration dates. Traders use these contracts to establish positions based on the price difference between various expiration dates. For example, a trader may take a bullish position on a contract expiring in March while simultaneously taking a bearish position on a contract expiring in June. This approach enables traders to profit from the disparity in prices between the two contracts.
- Binary contracts function as option contracts, granting a fixed payout if a specific condition is met by the expiration date. In the realm of cryptos, these agreements may yield a payout if the price of an asset reaches a pre-set level or remains within an indicated price range.
- Future swaps provide traders with the opportunity to trade future cash flows by considering the variation in prices between two cryptos. The participants in a future swap reach an agreement to exchange the difference between the initial and final prices of the underlying assets. These swaps are frequently employed in arbitrage and hedging techniques.
It is crucial to notice that the availability of these diverse types of crypto futures trading agreements may depend on the specific exchange. Traders should meticulously consider their trading objectives, risk tolerance, and the features of each futures type before engaging in trading. If you want to have some practice in this type of trading, welcome to the WhiteBIT exchange. It offers demo tokens for those willing to polish their trading strategy and work with emotions while gaining experience in crypto trading.