Strategy 07
Perpetuals
A funding market, traded as one.
Perpetual futures have no expiry. Instead, a periodic funding payment between longs and shorts keeps the contract price tethered to spot. That payment is a price for leverage, set continuously by crowd demand. This mandate trades it, and uses the same contracts to add exposure to a trade when the desk wants more of it than spot alone would give, with the risk of that exposure sized and managed before the position is opened.
Venues in the perpetuals book
Where the funding is traded
Funding capture and cross-venue differentials need at least two venues with different participants. Wesvel runs the centralized side of the book on Kraken, where spot, perpetuals and margin lending sit under one account and one limit, and the on-chain side on Hyperliquid, where margin, positions and funding are visible on-chain.
Regulated derivatives and spot venue
Kraken
What they do
A long-operating regulated exchange offering spot markets, perpetual and dated futures, margin lending and institutional custody under one account structure, with fiat rails through its own banking entity.
On-chain perpetuals venue
Hyperliquid
What they do
A perpetual futures exchange running on its own chain with a fully on-chain central limit order book, hourly funding, cross and isolated margin, and a transparent liquidation and insurance mechanism.
Options, dated futures and hedging structures sit under Derivatives. This page covers what the desk does with perpetuals specifically.
How funding works
Each venue computes a funding rate from the gap between the perpetual’s mark price and an index of spot prices. When the perpetual trades rich, longs pay shorts; when it trades cheap, shorts pay longs. Payments settle at fixed intervals directly between position holders. The exchange takes no side.
Funding capture
A short perpetual held against an equal long spot position has near-zero price exposure and collects funding whenever the rate is positive. The spot leg is held in custody; the futures leg is margined at the venue.
Cross-venue funding differentials
Funding for the same asset differs across exchanges because each venue has its own participants and its own leverage demand. Holding a long perpetual on the venue where funding is low against a short on the venue where it is high captures the differential with no spot leg at all, at the cost of concentrating exposure to two counterparties instead of one.
Perpetual versus dated basis
Dated futures embed an implied funding rate over their remaining life. When the market’s implied rate and the perpetual’s realized rate diverge, the two contracts can be traded against each other. This is a term-structure position, not a directional one.
Adding exposure with managed risk
Not every perpetual position is a carry trade. When the desk has a view it wants more of, whether a spot position it is building, a relative-value spread or an event it has priced, perpetuals are the cleanest way to add that exposure without moving more capital on to a venue. Leverage here is a tool, not the trade. The size of the position is set from the loss the desk is prepared to take on the view and the distance to liquidation that leaves, margin is held in stablecoins rather than in the asset being traded, and funding paid is tracked as a cost against the view so that a position that is right on direction and wrong on carry is seen for what it is.
Liquidation management
Every perpetual position has a liquidation price. The strategy manages the distance to it continuously, topping up margin, reducing size, or moving collateral between venues before the engine acts. Insurance fund depth and auto-deleveraging rules are part of venue diligence, because they determine what happens in the tail.
Go deeper
Inside Perpetuals
- 01How Funding WorksMark price, index price and the periodic payment between longs and shorts that keeps a perpetual tethered to spot.
- 02Funding CaptureThe core carry position: spot in custody against a short perpetual at the venue, collecting funding with near-zero price exposure.
- 03Cross-Venue Funding DifferentialsHolding a long perpetual where funding is low against a short where it is high, capturing the difference with no spot leg.
- 04Perpetual vs. Dated BasisTrading the perpetual’s realized funding against the interest rate implied by a dated future’s premium.
- 05Exposure with Managed RiskHow the desk uses perpetuals to add exposure to a view it wants more of, and the sizing, margin and cost discipline that keeps leverage a tool rather than the trade.
- 06Liquidation ManagementManaging the gap between a position and its liquidation price, margin, sizing, and what happens in the tail.
- 07Venue DiligenceHow derivatives venues are reviewed before the book trades on them, and what puts one off the list.