◇ GLOSSARY

Terms

Perpetual futures (perp): A derivative contract with no expiry date. You hold price exposure to the underlying without owning it; funding payments keep the contract near spot. Unlike a quarterly future, you do not roll or take delivery unless you close into spot elsewhere.
Funding: A periodic cash transfer between longs and shorts, paid on a fixed schedule (hourly on Hyperliquid, every 8 hours on many venues). When the perp trades above the index the rate is usually positive and longs pay shorts; below, shorts pay longs. It is not a fee to the exchange: it is the mechanism that pulls the perp back toward spot, and it runs whether or not your direction is working.
Mark price: The exchange's fair-value estimate for the contract, typically built from the index price plus a decaying basis component rather than the last trade. Unrealized P&L, margin checks, and liquidations all key off mark. A single wild print on last does not liquidate you; a move in mark can.
Index price: A spot reference aggregated from external venues, used as the anchor for mark and funding. It represents where the underlying trades in cash markets, not on the perp order book alone. When the perp drifts from index, funding transfers incentivize arbitrageurs to close the gap.
Maintenance margin: The minimum equity required to keep a position open. Equity is your margin plus unrealized P&L; when it falls below maintenance, the venue liquidates you automatically. Leverage sets how close you start to this floor at entry.
Initial margin: Collateral required to open a position, typically notional divided by leverage. It is the upfront deposit the venue locks when you enter. Unrealized gains can add to usable margin on cross accounts; losses erode it toward maintenance.
Liquidation: Forced closure when equity falls below maintenance margin. The venue sends market orders to close your position; there is no phone call and no grace period. Liquidation uses mark price, not last, on most venues.
Isolated / cross margin: Isolated margin caps risk to that position's collateral: you lose at most what you posted for that trade. Cross margin lets the whole account back the position, giving more room before liquidation but putting your entire balance at risk. Most venues default to cross unless you choose isolated.
Open interest: Total outstanding notional of open contracts on a venue. It measures how much size is still open, not whether the crowd is net long or short. Rising OI with extreme funding can signal a crowded book and higher cascade risk on liquidations.
Basis: The difference between perp price and the spot index. Positive basis means the perp trades rich to spot; negative means cheap. Funding is the mechanism that compresses basis over time by transferring cash between longs and shorts.
Carry: The cost or income from holding a position over time, primarily funding on perps. It compounds on a fixed schedule whether price moves your way or not. On a long hold in a positive-funding regime, carry can exceed your directional P&L.
Notional: The dollar size of your exposure, not the margin you posted. P&L and funding are calculated on notional. At 10× leverage on $1,000 margin, notional is $10,000: a 1% move in the underlying is roughly ±$100 on the position.
ADL: Auto-deleveraging. When a liquidated position cannot be closed at better than its bankruptcy price and the insurance fund cannot absorb the loss, the venue force-reduces the most profitable, most leveraged positions on the other side. You can be in profit, on the right side, and still have your position trimmed. Ranking rules are venue-specific.
Oracle: External price feed or feeds that supply the index on on-chain and hybrid venues. Validators or operators aggregate CEX spot prices into a single reference. A bad or lagging oracle print can trigger wrongful liquidations on-chain.
Leverage: The ratio of notional exposure to margin posted, e.g. 10× on $2,000 margin controls $20,000 notional. It amplifies P&L per dollar of collateral: the same price move hits your equity harder. Higher leverage also puts you closer to liquidation at entry.
Equity: Your margin plus unrealized P&L on open positions. The venue compares equity against maintenance margin to decide if you stay open. Funding payments and adverse mark moves both shrink equity before you close anything.
Delta: How much your position value changes per unit move in the underlying. A $10,000 BTC perp long has roughly $10,000 of delta at entry: if BTC rises 1%, you gain about $100 before fees and funding. Perps give you delta without owning the asset.
Last price: The most recent trade executed on the venue's order book. Tickers, charts, and social media usually show last. Unrealized P&L and liquidation use mark, not last, so a wick on last may not match your account.
Funding interval: The schedule on which funding accrues and settles, e.g. every 1 hour on Hyperliquid or every 8 hours on many CEXs and regulated venues. The same annualized rate compounds differently across intervals: hourly funding hits your balance more often than 8-hour funding.
Insurance fund: A venue-held buffer that absorbs losses when liquidations fill worse than the bankrupt trader's remaining collateral. It sits between normal liquidation and ADL. If the fund is depleted in a crash, profitable traders on the other side can be auto-deleveraged.
Unrealized P&L: Paper profit or loss on open positions, marked against mark price on most venues. It is part of equity, so gains add cushion and losses erode margin before you close. You do not bank it until you exit; it can still trigger or delay liquidation.
Taker / maker fees: Execution costs charged per fill. Taker orders cross the spread and remove liquidity; maker orders rest on the book and add liquidity. Fees are separate from funding and apply when you open, close, or adjust. They belong in any all-in cost comparison against spot.
Bankruptcy price: The price at which a position's equity hits zero after losses, before fees and slippage on the liquidation order. The engine tries to close before this, but fast markets and thin books can fill worse, leaving a deficit for the insurance fund or ADL.
Socialized losses: Losses from bankrupt accounts that the insurance fund cannot cover, spread to other participants via ADL or venue rules. You did not take the losing trade, but your winning position can be reduced to balance the book.
Funding arbitrage: A delta-neutral trade that collects funding on one leg while hedging price risk elsewhere, usually long spot and short perp when funding is positive. Edge is carry minus borrow, fees, and basis risk if the perp stays rich or cheap.
Basis trade: A paired spot and perp position that bets on the spread between them while hedging delta, often to harvest funding or mean-reversion in basis. P&L comes from the spread change and carry, not from naked directional exposure.
Inverse contract: A perp or future margined and settled in the underlying coin (e.g. BTC) while quoting in USD. P&L and margin move in coin terms; USD value of collateral swings with the coin price even if your position is flat.
Coin-margined: Collateral posted in the underlying asset rather than stablecoin or fiat. Your margin balance is BTC (or ETH) denominated, so a flat perp still changes your USD equity when the coin moves.
Portfolio margin: A cross-account risk mode that offsets correlated exposures and may reduce initial margin versus isolated sleeves. One large move can still hit the whole book if offsets were mis-modeled.
Dated futures: A futures contract with a fixed expiry and delivery or cash settlement date. Unlike a perp, carry is priced into the term structure until roll; there is no hourly funding, but you must roll or exit before expiry.
Liquidation cascade: A chain reaction where forced liquidations move mark price enough to trigger more liquidations. Crowded, highly levered books with thin liquidity are the usual setup; open interest and funding extremes are warning signs.
Mark methodology: The venue's published rules for constructing mark from index, premium, and smoothing windows. Differs by exchange; during volatility mark can lag or lead last, affecting liquidations and unrealized P&L.
Slippage: The gap between the price you expected and the price you received, driven by order-book depth and market impact. Liquidation orders and large market orders in thin books slip hardest; stops can fill far through your trigger.
Reduce-only: An order flag that can only shrink an open position, not flip or increase size. Used for exits and stops so a fat-finger does not double exposure; the venue rejects or clips orders that would add.
Stop orders on perps: Conditional orders that trigger a market or limit exit when price crosses a level. On perps they interact with mark, last, and reduce-only flags; gaps through your stop are common in fast markets.
Premium index: The measured gap between perp mid or impact price and the spot index, often time-averaged before it feeds mark and funding. It is the quantitative basis the funding formula tries to close.
Oracle manipulation: Deliberate distortion of the external price feeds that set index and mark, via wash trading, oracle lag, or thin-market spikes on component venues. Can trigger wrongful liquidations or funding prints on on-chain perps.
Funding rate history: A time series of past funding payments on a contract, usually shown as an hourly or 8-hour rate and often annualized for comparison. It tells you what carry actually cost during prior regimes — not what the next print will be.
Predicted funding: A venue's forward estimate of the next funding payment, derived from current premium between perp and index. It updates as the book moves and can diverge sharply from the last settled rate before the clock resets.
Open interest cap: A venue-imposed limit on total outstanding notional for a contract or account tier. When OI approaches the cap, new positions may be blocked or leverage reduced until OI falls — a liquidity and crowding guardrail, not a personal position limit by default.
Liquidity: How much size the order book can absorb without moving price — depth at the touch and behind it. Thin liquidity means small market orders slip, liquidations move mark faster, and stops fill far from your trigger.
Depeg: When a pegged asset — usually a stablecoin or wrapped token — trades materially away from its intended anchor (often $1). Perp index and mark feeds that include the depegging asset can dislocate, triggering liquidations and funding shocks far from spot BTC or ETH.
Contagion: Spillover of stress from one market, venue, or balance sheet into unrelated positions. In perps, depegs, lender failures, and cross-margin books can move mark on assets you never traded as forced sellers hit every liquid book.
Event contract: A derivative that pays a fixed settlement — often $0 or $1 — based on whether a defined event occurs by a set date. Payout is bounded; you are not marking open-ended delta to a coin price. Regulated U.S. prediction markets list these; they are not the same product as a BTC perp.
Prediction market: A venue where prices reflect crowd estimates of event probabilities, usually via tradable event contracts rather than open-ended perps. Some operators also list regulated crypto perps alongside event markets — same brand, different contract specs and margin rules.
Perp DEX: A decentralized exchange that lists perpetual futures settled on-chain or via hybrid matching, with wallet custody instead of a traditional exchange account. Oracle design, liquidation bots, and insurance mechanisms vary by protocol.
CLOB: Central limit order book — bids and asks stacked by price, matched price-time priority. Most CEX perps and several perp DEXs use a CLOB; depth and spread at the touch define your slippage on entry and exit.
vAMM: Virtual automated market maker — a pricing curve that simulates a pool for perp trades without requiring passive limit orders on every tick. Traders swap against the curve; arbitrageurs and external oracles pull it toward index.
Cross-margin contagion: When cross-margin or shared collateral links positions so stress on one leg drains equity available to others — or when an external insolvency forces sales that hit your mark. Your isolated thesis can fail because someone else's book was cross-margined to the same venue.
Max leverage: The highest leverage ratio a venue allows on a contract or tier, e.g. 50× on BTC, 20× on alts. It caps initial margin at entry; maintenance margin still sets how close you are to liquidation after the fill.
Initial vs maintenance margin: The gap between collateral required to open (initial margin) and the minimum equity to stay open (maintenance margin). That buffer is your room before forced liquidation; higher leverage shrinks it because both are usually defined as fractions of notional.
Weekend liquidity: Thin order-book depth and wider spreads when traditional finance is closed and crypto spot market makers run reduced desks — typically Friday night through Sunday UTC. Gaps and cascades on weekend perps are often liquidity events, not new fundamentals.
Carry trade: Borrowing in a low-yield currency or funding regime and investing in a higher-yield asset — in TradFi, yen-funded risk assets; in crypto, often long spot/short perp to collect positive funding. Unwind when the funding spread flips or liquidity dries up.