What are derivatives and how to trade on them?
On CoinDeal Derivatives, traders do not buy or sell cryptocurrencies, yet they buy or sell contracts (derivatives) that predict a cryptocurrency’s price in the future, with BTC being used as the underlying asset on CoinDeal Derivatives.
A futures and a perpetual contract are types of derivatives products. A futures contract has an expiry date anywhere between minutes and years. The expiry date of a specific contract is the last day this contract can be traded on. It is the exchange which will make the decision on the expiry date.
Because derivatives are not only classified as cryptocurrencies but also as stocks, commodities or bonds, the settlement at the end of the contract can either be based on a cash or the physical product itself. This means that either the underlying asset is physically delivered to the trader (i.e. gold, wheat, oil) or in terms of a cash settlement, the value of the underlying asset is awarded to the trader.
Of course, on cryptocurrency derivatives exchanges the settlement is cash-based. On the other hand, a perpetual futures contract does not have an expiration date. Meaning, the trader may hold and close the positions whenever he or she wants. Index Price is a crucial part of futures trading.
Index Price is the average price of a specific token (in terms of cryptocurrency trading) from several exchanges.
CoinDeal Derivatives uses 11 different exchanges to calculate the most accurate Index Price. Our mathematical formulas secure the Index Price from extreme volatility.
Summarizing, derivatives trading is based on speculating the future price of an asset (i.e. Bitcoin) and trading contracts based on these speculations, rather than exchanging cryptocurrencies for fiat money or another cryptocurrency, as you do on spot exchanges.
CoinDeal Derivatives offers their clients perpetual futures trading with leverage up to 50x.