What a futures contract is

Summary

A futures contract is an agreement whose value follows the price of something else, such as Bitcoin, without you holding the coin itself. You can profit or lose from the price going up (long) or down (short). Traditional futures end on a set date; most crypto futures are perpetual, with no end date. You put up only part of the position's value, called margin.

Key points

• A futures contract follows a price without holding the asset.
• Long gains when the price rises; short gains when it falls.
• You put up margin, only part of the full position value.

Check yourself

What does a short position aim to profit from?

Practice