> For the complete documentation index, see [llms.txt](https://nfex.gitbook.io/docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://nfex.gitbook.io/docs/getting-started/what-are-nft-perpetual-contracts.md).

# What Are NFT Perpetual Contracts?

Learning some fundamentals about perpetual contracts is crucial before you begin trading NFT contracts on NFEX.

## What is an NFT perpetual contract? <a href="#what-is-a-perpetual-futures-contract" id="what-is-a-perpetual-futures-contract"></a>

What exactly is an NFT perpetual contract? In finance, a perpetual contract (also called a perpetual swap) is an agreement that allows traders to buy or sell an asset at any time in the future, without any expiration date. This type of contract enables traders to take long or short positions on the underlying asset, thereby maximizing profit opportunities while also hedging against risk and exposure. At NFEX, an NFT perpetual contract is a financial product that allows traders to go long or short on the floor price of NFTs, using a fraction of the position value as collateral. There are several unique features of NFT perpetual contracts at NFEX:

* **No expiry.** NFT perpetual contracts have no expiration date, allowing traders to hold their positions as long as they are not liquidated.
* **Leverages.** NFEX also offers leverages, enabling traders to buy and sell NFT collections with only a small amount of ETH as collateral.
* **Funding Rate.**  since the value of perpetual contracts is tied to the value of their underlying assets, NFEX uses a funding rate mechanism to ensure that the perpetual contract price corresponds to the index by balancing the supply and demand between buyers and sellers. As a result, the price of an NFT perpetual contract closely tracks the floor price of its underlying NFTs. Therefore, trading perpetual contracts on NFEX is very similar to trading NFT collections on spot marketplaces.

## **NFEX Perpetual Market Mechanics**

What mechanism is our NFT perpetual contracts built on?

When trading perpetual contracts, a trader needs to be aware of several mechanics of the derivatives market. The key components a trader needs to be aware of are:

* **Multiplier:** Please see leverage under the [Contract Specifications](/docs/nfex-perpetual-guide/contract-specifications.md) for each instrument.&#x20;
* **Position Marking:** Perpetual contracts are marked according to the Fair Price Marking method<mark style="color:blue;">.</mark> The mark price determines Unrealized PnL and liquidations.&#x20;
* **Initial Margin and Maintenance Margin**: These key margin levels determine how much leverage one can trade with and at what point a liquidation occurs.&#x20;
* **Funding:** Any position in a perpetual contract that is open when Funding occurs will pay or receive funding.  At NFEX, funding occurs every 1 hour.

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