The cryptocurrency market is a rapidly changing space, and Binance Futures is quickly becoming one of the largest and most popular futures exchanges. One way to speculate on the price of financial instruments is by trading futures contracts, and Binance offers quarterly futures contracts, which settle in cash, backed by highly liquid markets and a robust trading engine. In this article, we’re going to explore what exactly quarterly futures contracts are, how they work, and the benefits of trading them on Binance.
What are quarterly futures contracts?
Quarterly futures contracts are agreements to buy or sell an asset at a predetermined price at a future date. On Binance, this expiry date will be the last Friday of the quarter for the BTCUSD 0925 contract. When the contracts expire, the underlying asset, in this case BTC, is delivered in the form of currency. Traders use quarterly futures to speculate on the future price of the asset, as there is more liquidity and volume compared to the spot market.
How do quarterly futures contracts work?
When trading on Binance, the margin used for quarterly futures will be BTC, and the fees are also paid in BTC. There are multiple fee tiers for Binance quarterly futures, and some tiers offer fee rebates for makers, meaning those who provide liquidity to the market essentially get paid for it. Additionally, if you have an open position when the contracts expire, you’ll have to pay a delivery fee. Traders should also be aware of the maintenance margin requirements and liquidation risk, as well as the ticking size of $0.10.
Quarterly futures vs. perpetual futures
The main difference between quarterly and perpetual futures contracts is that quarterly futures expire whereas perpetual futures do not. Also, while some futures contracts automatically roll over to the next contract upon expiration, that isn’t the case with Binance quarterly futures. Instead, when the contracts expire, the quarterly contracts are settled in BTC at the average price of the last hour. The index for quarterly futures is based on the BTC/USD market, and not the BTC/USDT market, which allows traders to hedge against the risk of decoupling from USD. Furthermore, there are no funding fees associated with quarterly futures, making them ideal for longer-term holding.
Benefits of trading Binance quarterly futures
One of the key benefits of trading Binance quarterly futures is that traders can use BTC both as margin and for settlement. This enables large traders, also known as whales, or even retail traders, to hedge their BTC holdings by opening a short position and exploiting the price difference between the spot and futures market. Furthermore, profits from trading quarterly futures increase the long-term BTC stack, making them a great way to speculate and increase the long-term holdings. Finally, traders can take advantage of contango and backwardation to generate arbitrage opportunities.
In conclusion, Binance quarterly futures contracts are one of the most convenient ways to speculate on the price of a financial asset. By offering settlement in BTC, traders can hedge against the risk of USDT decoupling from USD and take advantage of different arbitrage opportunities. Moreover, traders with an open position upon expiry will have to pay a delivery fee, in addition to understanding the various margins and fees associated with trading.
