Anatomy of a Perp · Ch. 05
Futures vs Spot
Buy ETH on the spot market and you own a coin. It sits in your wallet, yours, until you sell it. Buy a perp and you own… nothing. You’re holding a bet on ETH’s price that can ride for as long as you like: no coin, no end date. That “forever” is the whole trick.
The Idea
Intuition
On the spot market you trade the asset itself. Pay the price, the coin is yours, done.
A future is not the asset. It’s a contract: an agreement about a price, settled later in cash. You post margin, you pick a side, and no coin ever changes hands. It’s the pure bet from the last three chapters, written down.
Because it’s a bet about later, a future’s price rarely equals spot. It trades a bit above or below, and that gap has a name: the basis.
A normal future has an expiry date. On that day it settles at spot, so the basis is forced to zero. The gap always closes in the end.
A perpetual future throws the expiry away. It never settles, so you can hold the bet forever. But that’s the catch: with no expiry, nothing forces the price back to spot. The basis could drift and just… stay there. So a perp needs a different tether. That tether is funding, and it’s the next chapter.
The Math
How It’s Calculated
In plain terms: the basis is just how far the contract’s price sits from spot, and a dated future’s basis is dragged to zero as its expiry approaches.
The basis is the contract price minus the spot (index) price:
Traders usually quote it as a fraction of spot:
For a dated future, the basis is pulled to zero as time runs out: at expiry the contract settles at spot, so by definition the two are equal.
A perpetual has no expiry to do that. Instead, funding nudges the price back toward spot every few hours (next chapter). Same goal, a different lever.