Delivery futures contracts, often called futures, are derivative products. They involve an agreement to buy or sell a specific cryptocurrency at a predetermined price on a set future date. This guide explains their core mechanics, typical features, and strategic uses.
How Do Delivery Futures Contracts Work?
A delivery futures contract is a formal agreement between two parties. The buyer agrees to purchase, and the seller agrees to deliver, a specific quantity of a cryptocurrency at a fixed price on an expiration date in the future.
Let's use a Bitcoin example for clarity:
A buyer and seller enter a contract. They agree that on December 31, 2022, they will exchange 5 Bitcoin at a price of $20,000 each. When that date arrives, the seller is obligated to sell the Bitcoin at that price, regardless of the current market price. The buyer is equally obligated to purchase them at that price. Both parties also have the option to close their positions before the delivery date to realize their profit or loss.
Like many crypto futures, these contracts are often settled in the native cryptocurrency (e.g., Bitcoin) while the contract's value is denominated in a stable asset like the US Dollar. For instance, if BTC is trading at $10,000, buying 20,000 contracts is equivalent to holding a 2 BTC long position.
Key Features of Delivery Futures
- Contract Value: A single contract is typically equal to $1 USD.
- Settlement Type: Cash-settled in the contract's base cryptocurrency (e.g., BTC).
- Fees: Maker fees (providing liquidity) are often lower, around 0.02%. Taker fees (removing liquidity) are higher, around 0.055%.
- Liquidation: Positions are liquidated based on a fair mark price to avoid market manipulation. A special note: near the delivery time, the system may use the expected delivery price to trigger liquidation.
- Price Limits: Exchanges impose limits to prevent erroneous trades or extreme volatility. A common limit is ±5% from the last traded price.
Advantages of Trading Delivery Futures
Traders utilize these instruments for several strategic reasons beyond simple speculation.
- Price Hedging: Miners and long-term holders can lock in future selling prices to protect against market downturns.
- Predictable Costs: Unlike perpetual contracts, there are no funding fees. This makes holding a position until expiration predictable; your profit or loss is solely based on entry and exit price.
- Arbitrage Opportunities: Traders can capitalize on price discrepancies between the futures price and the spot price of an asset as the delivery date approaches.
- Portfolio Diversification: Futures provide exposure to crypto price movements without needing to hold the underlying asset directly.
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Delivery Dates and Scheduling
Exchanges list futures contracts with specific quarterly expiration dates. A typical naming convention is BTC-USD-30SEP22.
Historically, a quarterly schedule might have looked like this:
| Contract Symbol | Listing Date | Delivery Date |
|---|---|---|
| BTCUSD0930 | March 11, 2022 | September 30, 2022 |
| BTCUSD1230 | June 10, 2022 | December 30, 2022 |
| ETHUSD0930 | March 11, 2022 | September 30, 2022 |
Settlement Time: Contracts typically settle at 08:00:00 UTC on the delivery date.
Delivery Fee: A small settlement fee, often around 0.05%, may be applied upon delivery.
Risk Management Essentials
Futures trading involves significant leverage, which magnifies both gains and losses. Key risks include:
- Liquidation Risk: If the market moves against your position, you can lose your initial margin and be liquidated.
- Volatility: Cryptocurrency markets are highly volatile, making prices unpredictable.
- Slippage: During periods of high volatility, orders may be filled at worse prices than expected.
Always use stop-loss orders, manage your leverage wisely, and never invest more than you can afford to lose. 👉 View real-time risk management tools
Frequently Asked Questions
What is the main difference between perpetual and delivery futures contracts?
Perpetual contracts have no expiration date and use a funding fee mechanism to tether their price to the spot market. Delivery contracts have a fixed expiration date and settle at the agreed price, with no funding fees involved.
Can I close my delivery futures position before the expiration date?
Yes, absolutely. Most traders close their positions before expiration to realize their gains or losses. Physical delivery of the asset is rare; most contracts are cash-settled or closed via an offsetting trade.
Who typically uses delivery futures contracts?
They are used by a wide range of participants. Speculators seek profit from price movements, while hedgers (like miners or large holders) use them to lock in prices and manage financial risk.
How is the final settlement price determined?
The settlement price is usually calculated based on the average spot price of the underlying asset from a specific period (e.g., one hour) leading up to the exact expiration time. This prevents last-minute price manipulation.
Is the leverage the same for all delivery contracts?
Leverage limits can vary based on the contract and the trader's risk level. Major pairs like BTC and ETH often allow higher leverage compared to smaller altcoin contracts. Exchanges adjust these limits to manage overall risk.
What happens if I don't close my position before expiration?
The exchange will automatically settle your position at the official settlement price. Any final profit or loss will be calculated and credited or debited to your account. The contract will then cease to exist.