Quarterly futures contracts are an important tool for traders looking to capitalize on short-term price movements in a given market. In this article, we’ll provide an overview of quarterly futures and explore the differences between these contracts and perpetual futures. With this knowledge, traders can decide which type of contract is better suited to their trading style and goals.
Contents of the article:
What are quarterly futures contracts?
Quarterly futures contracts are derivatives that provide holders the ability to enter into a contract with the seller to buy or sell an asset at a particular future date quarterly. Unlike other longer-term futures contracts, quarterly futures contracts are typically used to lock in pricing and avoid price fluctuations in more volatile markets. They function similarly to perpetual futures contracts, but represent smaller and more frequent transactions, allowing traders better market access while quickly capitalizing on opportunities they otherwise may not have had without quarterly contracts.
Quarterly futures contracts provide investors with access to markets and investments they would not normally have access to, as well as providing protection against volatile market conditions. While quarterly futures contracts can be highly lucrative, as with any investment there is always a risk involved and therefore it is important for investors to educate themselves about the market and the specific quarterly futures contract before making any decisions.
How do quarterly futures contracts work?
Quarterly futures are a popular form of investment, with an expiration date that must be observed. These contracts expire on the last Friday of every quarter, ensuring an easy way for investors to keep track and plan their strategies accordingly; just like any other standard future contract. A Bi-quarterly futures is generated on the third Friday from the last of each quarter month (March, June, September, December) and expires on the last Friday of a half-year. The most recent BTCUSDT Quarterly 0331 - will settle on March 31st 2023 in cash (USD) allowing traders who have acquired positions before expiry ample time - as well as security - when preparing for settlement. The most recent BTCUSD quarterly 0630 - will settle on June 30th 2023. Alternatively, the contacts can also have physical settlement, which means traders can literally buy one bitcoin for the predetermined price.
If the trade isn’t going as planned, traders have the choice of closing their positions (long or short) before expiration. The resulting profits and losses (PnL) would be calculated by comparing the opening price to that at closure. For example, invest in a BTCUSDT quarterly 0331 and you’ll be set for the quarter. By buying one BTCUSDT quarterly 0331 contract at $30,000 now, you’ll lock-in that price come the expiry date on 31 March - regardless of how much Bitcoin decides to fluctuate before then. The contract will be settled on March 31 and the traders will buy one bitcoin for $30,000.
What are the benefits of quarterly contracts?
Quarterly futures contracts can be beneficial for traders because they provide flexibility and opportunities to trade at regular intervals. Unlike other futures contracts, quarterly futures have a particular expiration date that is quarterly rather than the typical yearly expiration. This means that traders are able to plan their trading strategies around a quarterly structure instead of waiting a long-term before they can make changes. Quarterly futures offer more frequent price discovery events which enables traders to react to market forces in a timely fashion and adjust their trading positions accordingly.
Quarterly contracts also offer liquidity and lower margin requirements, as well as harmonized global standards for pricing and risk management. This can make quarterly contracts an attractive option for capitalizing on opportunities in the global market. In addition, quarterly futures provide more liquidity opportunities as trades can be made on each quarter’s delivery so there is often a greater number of participants in the market compared with perpetual contracts. Overall, delivery futures are appealing for those looking for short-term trading opportunities as well as those who prefer frequent trading and renewed exposures over longer durations.
The most obvious difference between these two types of futures is their expiration date. Quarterly delivery futures are designed to expire at a certain point in time - usually on the last Friday of the quarter. This means that if you hold a position in a quarterly future until its expiration date, your position will be automatically closed out at the prevailing market price. On the other hand, perpetual futures never expire; instead they use a rollover system to extend positions that have been open for longer than 8 hours (or 16 hours in some cases).
Quarterly futures trading does not require any type of rollover process because they expire on their own accord after 3 months. However, with perpetual futures trading there is an additional process called “rollovers” which keep positions open beyond 8 or 16 hours. These rollovers involve transferring part (or all) of your position from one expiry date to another one month later. This allows traders to keep their positions open for extended periods of time without having to close them out prior to the expiry date.
Another key difference between these two types of contracts lies in their funding fee structure. Quarterly futures contracts typically do not include any kind of funding fee as they are designed to be held until their expiration date and then liquidated at that point in time. However, perpetual futures contracts do include a funding fee which is charged every 8-hours or 16-hours depending on the contract specification; this fee helps incentivize market makers who provide liquidity by offsetting some of their risk exposure.
BTC vs USDT Margined
Both quarters and perpetuals can be margined either in Bitcoin (BTC) or Tether (USDT). While both BTC and USDT margins offer similar levels of liquidity and exposure, there are some important differences between them; BTC margin offers more potential profit potential due to its higher volatility while USDT margin offers more stability due to its lower volatility but also lower potential profits compared to BTC margin trades.
Finally, it’s important to consider how these different types of contracts fit into your overall trading strategy as well as what type of risk profile you prefer when selecting one over the other. If you prefer shorter-term trades with less volatility and risk then quarterly contracts may be better suited for you; however if you prefer more flexibility in terms of duration and exposure then perpetuals may be the better choice for you given their higher leverage options and ability to rollover positions indefinitely.
How to trade quarterly futures contracts on XT.COM Futures
Step 2: On the futures trading page, you can place trading orders on the right of the screen.
Step 3: The coin-margined delivery contract is a quarterly or bi-quarterly contract denominated in a certain kind of digital asset (such as BTC or ETH). XT.COM currently offers BTC/USD quarterly, ETH/USD quarterly, and many other delivery contracts trading pairs. Here, we will use BTC USD quarterly trading as an example.
Step 4: If you don’t have enough funds in your Futures account, you can easily transfer assets from Spot to Futures account with just one click. If you don’t have funds on the Spot side either, you can buy crypto directly with fiat currency.
Step 5: When your futures account has the required funds, you may place your limit order by setting price and the number of contracts you would like to purchase. You may then click “Open Long” or “Open Short” to complete your order. A long position means you expect the market to rise, while a short position means you expect it to fall.
Step 6: You can modify leverage of long or short positions using cross-margin mode or isolated-margin mode. XT Futures supports two different margin modes to accommodate differing trading strategies. They are Cross Margin mode and Isolated Margin mode. By default, all traders start in cross margin mode.
- Isolated Margin: Isolated Margin allows traders to manage their risk in a more efficient way by allowing only part of their position to be automatically liquidated if there is a significant price movement. Isolated Margin also provides traders plenty of liquidity while they maintain open positions, allowing them to make more strategic decisions when the markets move quickly.
- Cross Margin: Cross Margin is an optional margin mode that reduces the margin requirement for traders, allowing them to take on larger positions without having to deposit extra funds into their account. Cross Margin works by allowing traders to spread their total account collateral over all of the positions held in the same contract. Therefore, Cross Margin ensures that traders have adequate margin levels across all positions in a particular contract and can allow them to increase their position size if desired.
Step 7: You can choose your order type using limit order, market order or trigger order.
- A limit order lets you set a minimum price for the order to execute
- A market order will execute immediately at the current best available market price
- A trigger order lets you specify the stop price an order should execute. If the market order price falls to your stop price, your order will trigger a sell
Each order you place specifies a Time in Force (TIF) along with the Order Type. TIF indicates how long the order will remain active before it is executed or before it expires. Available TIF options may change, depending on the order type, exchange and contract.
Step 8: During the futures trading, if you need to perform some basic arithmetic, you can use the provided calculator function on the futures trading page.
In conclusion, understanding the differences between quarterly futures and perpetual futures can help traders determine which type of contract best suits their individual needs when it comes to trading derivatives markets like those offered through XT futures exchange. While both types offer advantages depending upon individual preferences such as shorter expiration times for those seeking shorter commitments or margin trading capabilities for those looking leverage trades with increased potential profits but also higher risk profiles; understanding how each works before entering any position will ensure that you make informed decisions when entering into any kind of derivative contract regardless if its based off quarters or perpetuity!
About XT Futures
XT.COM derivative trading platform offers some of the best features available on the market. With USDT-margined perpetual and quarterly contracts, as well as coin-margined perpetual and quarterly contracts and prediction markets, you’ll be able to access easy, fast trades. Plus, with copy trading, futures grid trading and more advanced tools at your disposal, the possibilities are endless. Our platform strives to cater to our large user base by providing a secure, trusted and intuitive trading experience.