Maximize upside and downside potential. Living on the edge but financially. Perpetual Futures contracts are my all time favorite financial instrument. I have lost and made quite a lot (relatively) of money off them. I will not bore you with the details about the futures contracts as there are way better resources for learning about them online. The gist of it is you are making a bet that a commodity let’s say Bitcoin will not drop below or go above a certain price for the entirety of the period that you hold the contract. If it does go below or above the price (depends on if you are shorting or going long) you lose all your money!
At first it seems absurd, why would I want to make such a bet in the first place? Well if the price keeps going in the direction that you predicted it would go, you get higher returns. Bitcoin could rise by 3% but you could make a 30% return on your investment(assuming 10x leverage). How much you make depends on your leverage. So more leverage is good right? Wrong! Actually as the senior dev would say, “it depends!” Higher leverage means a higher liquidation price (the bet price), assuming you are going long. If you are spending all your money on the future and you long BTC, the price has to only move against you (drop) 10% before you get liquidated. 10% also happens to be the amount that BTC has to rise for you to get 100% return on investment (before fees but they are usually insignificant). Leverage can go as high up as 125x, to get liquidated the commodity has to drop/rise only 0.8% but to get 100% it has to move the same little amount.
If you are anything like I was when I first knew about futures, you are getting excited. Probably want to know where you can start trading and making all this free money. But there’s another special kind of future that is even riskier, but has higher returns. Physical settlement commodity futures. They function similar to regular futures but they are settled in the actual commodity you are trading. If you were trading BTC and the price rose 5% using a coin-m future (physical settlement future for crypto), you would be up 50% on BTC and and since BTC is valued even higher you would be up to ~57.5% in dollar terms. Seems too good to be true? Same applies to if the price was to fall by just 5%. Coin-m futures however can be monumental, imagine opening a coin-m future when BTC was just a $1. It’s such an extreme case that I will not bother doing the math.
The point of this post was that you should open a Coin-Margined future on your favourite crypto today. Ok not today, please read a bit more about futures before even attempting to trade.