# What are perpetuals

Perpetual futures (perps) are derivative contracts that let you speculate on asset prices without owning the underlying asset. Unlike traditional futures, perpetuals have no expiration date, meaning you can hold a position indefinitely.

### How perpetuals work

When you trade a perpetual:

1. You deposit collateral 
2. You open a **long** (betting price goes up) or **short** (betting price goes down) position
3. Your profit or loss is determined by the price movement multiplied by your position size
4. You can close the position at any time

You never actually buy or sell the underlying asset. Instead, you're trading a contract that tracks its price.

### Leverage

Perpetuals allow leverage, meaning you can control a larger position than your collateral would normally allow.

**Example**: With 10x leverage and $100 collateral, you can open a $1,000 position.

* If the price moves 5% in your favor → you gain $50 (50% return on collateral)
* If the price moves 5% against you → you lose $50 (50% of collateral)

Higher leverage amplifies both gains and losses. Dreamcash supports up to 40x leverage on eligible markets.

### Funding rate

Since perpetuals don't expire, they use a mechanism called the **funding rate** to keep the contract price aligned with the spot price.

* When funding is **positive**: longs pay shorts
* When funding is **negative**: shorts pay longs

Funding payments occur periodically (typically hourly on Hyperliquid). If you're holding a position, you'll either pay or receive funding depending on your direction and the current rate.

### Liquidation

If the market moves against your position and your losses approach your collateral, you risk **liquidation**. This is when the exchange automatically closes your position to prevent further losses.

Liquidation price depends on your leverage and entry price. Higher leverage = closer liquidation price = higher risk.

### Key terms

| Term                   | Definition                                           |
| ---------------------- | ---------------------------------------------------- |
| **Mark price**         | The price used for PnL calculations and liquidations |
| **Entry price**        | The price at which you opened your position          |
| **Unrealized PnL**     | Profit/loss on your open position                    |
| **Realized PnL**       | Profit/loss that has been settled (position closed)  |
| **Margin**             | Collateral allocated to a position                   |
| **Maintenance margin** | Minimum margin required to keep a position open      |

### Further reading

For technical details on how perpetuals work on Hyperliquid:

* [Contract specifications](https://hyperliquid.gitbook.io/hyperliquid-docs/trading/contract-specifications)
* [Margining](https://hyperliquid.gitbook.io/hyperliquid-docs/trading/margining)
* [Funding](https://hyperliquid.gitbook.io/hyperliquid-docs/trading/funding)
* [Liquidations](https://hyperliquid.gitbook.io/hyperliquid-docs/trading/liquidations)