# Perpetuals vs Traditional Brokerage Margin

If you're coming from traditional stock trading with margin, perpetual futures will feel familiar in some ways but different in others. This page compares the two.

### Core differences

| Aspect            | Traditional margin (stocks)   | Perpetuals                    |
| ----------------- | ----------------------------- | ----------------------------- |
| **What you own**  | Actual shares of stock        | A contract tracking the price |
| **Settlement**    | T+1 or T+2 (days)             | Instant                       |
| **Trading hours** | Market hours (9:30am–4pm ET)  | 24/7                          |
| **Leverage**      | Typically 2x (Reg T)          | Up to 40x                     |
| **Interest/fees** | Margin interest (annual rate) | Funding rate (hourly)         |
| **Short selling** | Requires borrowing shares     | Native, no borrowing needed   |
| **Expiration**    | N/A (you own shares)          | None (perpetual)              |

### Ownership vs exposure

**Traditional margin**: When you buy stock on margin, you own actual shares. You receive dividends, have voting rights, and the shares sit in your brokerage account.

**Perpetuals**: You don't own anything. You hold a contract that pays out based on price movement. There are no dividends or voting rights. You're purely speculating on price.

### Leverage mechanics

**Traditional margin**: In the US, Regulation T limits most retail accounts to 2x leverage (you can buy $2 of stock for every $1 of cash). Pattern day traders can access 4x intraday. You pay interest on borrowed funds, typically 8–12% annually.

**Perpetuals**: Leverage up to 40x is common. Instead of interest, you pay or receive the funding rate, which adjusts based on market conditions. Funding can be positive or negative, sometimes you get paid to hold a position.

### Going short

**Traditional margin**: To short a stock, your broker must locate shares to borrow. Some stocks are hard to borrow or unavailable. You pay borrow fees, and there's risk of a short squeeze or forced buy-in if shares are recalled.

**Perpetuals**: Shorting is native to the contract. No borrowing required. You can short any available market instantly with the same mechanics as going long.

### Settlement and availability

**Traditional margin**: Trades settle in 1–2 business days. Markets close on weekends and holidays. After-hours trading has limited liquidity.

**Perpetuals**: Trades settle instantly on-chain. Markets run 24/7/365. No distinction between regular and after-hours.

### Risk profile

**Traditional margin**: With 2x leverage, a 50% price drop wipes out your equity. Margin calls require you to deposit more funds or your broker sells your shares.

**Perpetuals**: With higher leverage comes higher risk. At 10x, a 10% adverse move liquidates your position. At 40x, a 2.5% move does the same. Liquidation is automatic—there's no margin call to respond to.

### Funding vs margin interest

| Cost type           | When you pay                | Typical rate                          |
| ------------------- | --------------------------- | ------------------------------------- |
| **Margin interest** | Continuously while holding  | 8–12% annually                        |
| **Funding rate**    | Periodically (hourly on HL) | Variable, can be positive or negative |

Funding rates fluctuate based on market sentiment. When most traders are long, longs pay shorts. When most are short, shorts pay longs. This can work in your favor or against you depending on positioning.