What are delivery contracts and perpetual contracts? Which one is better, delivery contracts or perpetual contracts?

In the cryptocurrency market, it is crucial to understand the difference between delivery contracts and perpetual contracts. A delivery contract is a contract that settles on a specific date on which the buyer and seller must exchange assets. A perpetual contract is a contract with no expiration date that allows traders to bet on the future price of an asset.

What are delivery contracts and perpetual contracts?

Delivery Contract

A delivery contract is a futures contract that requires physical delivery after expiration. On expiration, the contract holder must deliver the actual asset underlying the contract, such as a stock, commodity, or other financial instrument.

Perpetual Contract

A perpetual contract is a futures contract with no expiration date. It does not involve actual delivery, but maintains the contract value consistent with the price of the underlying asset through regular settlements. Contract holders can hold contracts by paying or receiving funding rates.

Which one is better, delivery contract or perpetual contract?

Which contract type you choose depends on your trading needs and preferences:

• Delivery Contract

  • Advantages:

    • Provides more direct exposure to the underlying assets
    • Since there is no funding rate, long-term holding costs are lower Low
    • Clear expiration date, easy to manage risk

  • Disadvantages:

    • At maturity Physical delivery is required, which may involve logistics costs or inconvenience
    • Some assets may lack liquidity, making it difficult to close positions

• Perpetual contract

  • Advantages:

    • No delivery obligation, more flexible and convenient
    • 24/7 trading, providing higher liquidity and trading opportunities
    • Can use leverage to trade, increasing potential profits

  • Disadvantages :

    • Funding rates may affect transaction costs, especially when holding contracts overnight
    • The market price of a perpetual contract may differ slightly from the price of the underlying asset Deviations
    • lack of clear expiry dates may require close monitoring of positions

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