Strategy 06 · Perpetuals
Perpetual vs. Dated Basis
Continuous funding against a fixed term.
A dated future’s premium over spot implies a rate of interest over its remaining life. A perpetual’s funding is a rate paid continuously. In principle the two should agree; in practice they diverge, because different participants set them. When the market’s implied term rate and the perpetual’s realized rate part ways, the two contracts can be traded against each other with no exposure to the asset’s level.
Reading the two rates
The dated future’s implied rate is fixed at entry: buy spot, sell the future, and the premium is what the position earns to expiry. The perpetual’s rate is realized over time: it is what funding actually pays between now and then. A position long the dated future and short the perpetual pays the fixed implied rate and receives realized funding; the reverse position does the opposite. Which way to be depends on whether funding is expected to run above or below the curve.
A term-structure position
This is a view on rates, not on the asset. It is the digital-asset equivalent of a fixed-versus-floating position, with the added feature that the floating rate is set by leveraged speculators and the fixed rate by whoever is willing to hold a dated contract. The position is neutral to spot and directional on the spread.
Convergence and roll
At expiry the dated future converges to spot and the position must be closed or rolled into the next contract. Rolling re-prices the fixed leg at the new curve. Before expiry the position marks to market as the basis moves, and can require margin even when the eventual outcome is unchanged.
Practice
How Wesvel approaches it
- 01Both rates are tracked as series across all venues and expiries, and positions are opened only where the divergence exceeds a recorded threshold.
- 02Positions are sized to survive the widest basis observed on the dated contract, not the basis at entry.
- 03Roll decisions are rule-based; the book is never forced into a roll by maturity concentration.
- 04Net directional exposure across the position is measured and held within a small limit.
More in Perpetuals
- How Funding WorksMark price, index price and the periodic payment between longs and shorts that keeps a perpetual tethered to spot.
- Funding CaptureThe core carry position: spot in custody against a short perpetual at the venue, collecting funding with near-zero price exposure.
- Cross-Venue Funding DifferentialsHolding a long perpetual where funding is low against a short where it is high, capturing the difference with no spot leg.
- Exposure 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.
- Liquidation ManagementManaging the gap between a position and its liquidation price, margin, sizing, and what happens in the tail.
- Venue DiligenceHow derivatives venues are reviewed before the book trades on them, and what puts one off the list.