Spot and futures: what's the difference

5 min read · When you own the coin, and when you only hold a bet on its price. What funding is.

Level:

Short version for experts: tables, lists and screenshots only.

Words in this lesson (10)

Long — Buying in the hope that the price will rise. Buy lower, sell higher.

Short — Selling in the hope that the price will fall: you sell something borrowed, then buy it back cheaper. You make money when the price drops.

Arbitrage — Making money on the price difference of the same thing in two places: buy where it's cheaper, sell where it's more expensive.

Opportunity (arbitrage pair) — A pair of trades in arbitrage: where we buy and where we sell.

Funding — A regular payment between those who are long and those who are short on a perpetual futures contract. Who pays depends on whether the futures price is above or below spot.

Spot — Ordinary buying and selling of the coin or stock itself: you buy it — it's yours.

Futures — A contract on the price of an asset. You don't receive the coin itself — you gain or lose on the price change. Lets you short and use leverage.

Leverage — Money borrowed from the exchange. With 10x leverage, your $100 opens a $1,000 position: both profit and loss are ten times bigger.

Liquidation — The exchange force-closes a position when the loss has eaten all the collateral. The collateral is lost.

Position — An open trade: what you have bought or sold and haven't closed yet.

Spot

Spot is an ordinary purchase. Buy a coin — it's yours, it sits in your account. You can hold it for a year or transfer it to another exchange.

You can only make money when the price rises.
No leverage.
You can lose everything only if the coin falls to zero.

Futures

Futures are not a coin but a contract on its price. You don't own the coin — you gain or lose the price difference.

You can make money both on a rise (long) and on a fall (short).
There is leverage.
There is liquidation.

In crypto, people mostly trade perpetual futures — they have no expiry date and can be held as long as you like.

	Spot	Perpetual futures
You own the coin	yes	no
Profit on a fall	no	yes
Leverage	no	yes
Liquidation	no	yes
Holding cost	no	funding

Funding

Since a perpetual futures contract has no expiry date, there has to be a way to keep its price close to the price of the actual coin. That way is funding: every few hours some participants pay others.

The futures price is above spot (everyone wants to go long) → those who are long pay those who are short.
The futures price is below spot → the other way around.

The amounts are usually small — hundredths of a percent. But if you hold a position for weeks, they add up.

What a beginner should choose

Start with spot, or with futures without leverage. That way you learn to read the market instead of fighting liquidation.

Where this is in MAMAY

The "Terminal" tab trades futures.
In "Crypto Arbitrage" opportunities come in three kinds: spot versus futures, futures versus futures, and earning on funding. That's arbitrage — a separate learning track.

▶ Next: what to expect from trading

This is how it looks in MAMAY: “Terminal”