Understanding Dated Futures

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Dated futures are a type of financial contract that allow traders to buy or sell an asset at a predetermined price on a specific future date. The key difference between perpetual futures and dated futures lies in how they handle expiration. Perpetual futures do not have an expiration date, so they use a “funding rate” to help keep their prices in line with the underlying asset. On the other hand, dated futures have a set expiration date and don't require funding charges.

A dated futures contract typically includes several key components, each of which plays a crucial role in defining the contract's terms and trading conditions. Below are the key components of a dated futures contract:

Underlying: The cryptocurrency asset that the futures contract is based on.
Expiry: The specific date and time when the futures contract must be settled. At Bullish, the expiration occurs at 08:00 UTC.
Tenors: At Bullish, we support two tenors:
1. Weekly: 3 weekly contracts expiring every Friday over the next three weeks
2. Monthly: 4 monthly contracts expiring on the last Friday of each of the next four months
Settlement: Cash settled at expiry in USDC.
Trading Fees: The costs incurred when trading the futures contract i.e taker and maker fees.

Breaking down a BTC-USDC-20241204 Futures Contract

^{Contract Name: Bitcoin December 2024 Futures}
^{Underlying: Bitcoin(BTC)}
^{Expiration Time: January 17, 2024 8 AM UTC}
^{Tenor: 1 Month}
^{Settlement: Cash settlement in USD Coin (USDC)}
^{Trading Fees: Maker Fee 0 bps; Taker Fee: 1 bps}

Understanding the lifecycle of a dated futures contract

The lifecycle of a dated futures contract consists of two main stages: Active and Expired. During the “Active” stage, the contract is available for trading, allowing eligible market participants to buy or sell the contract and to create AMM instructions. Once the contract reaches its expiration date, it enters the “Expired” stage, where trading is unavailable and AMM instructions can no longer be created.

Settlement

Dated futures are cash settled at expiry, so do not require the transfer of the underlying asset between parties to a trade. Instead, only the profits or losses will be exchanged between the two parties involved in the trade. The difference between the contract price and the expiration price is settled in USD Coin(USDC). The unsettled PnL is debited from or credited to the trading account in the next hourly settlement cycle.