Crypto Trading Advanced Topics 2

Question 1

In a perpetual futures contract, what mechanism keeps the contract price anchored to the spot price?

Accepted Answer

Funding rate payments

Answer

Perpetuals have no expiry, so periodic funding payments between longs and shorts pull the contract price toward spot.

Question 2

A trader opens a 10x leveraged long. If the asset falls 10%, what roughly happens to their position?

Accepted Answer

It is liquidated near total margin loss

Answer

At 10x leverage a 10% adverse move wipes out the initial margin, triggering liquidation.

Question 3

What does 'basis' refer to in crypto futures trading?

Accepted Answer

The difference between futures and spot price

Answer

Basis is the spread between the futures contract price and the underlying spot price.

Question 4

When the funding rate is strongly positive on a perpetual, what does it indicate?

Accepted Answer

Longs are paying shorts, signaling bullish crowding

Answer

Positive funding means long holders pay shorts, typically reflecting an overcrowded bullish market.

Question 5

What is 'contango' in a crypto futures curve?

Accepted Answer

Futures priced higher than spot

Answer

Contango describes a market where futures contracts trade above the current spot price.

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