Ethereum (ETH) Futures Contracts: Exchanges, Benefits, and Risks
With daily volume on the leading crypto exchange tripling that of marketwide Ethereum spot trades, Ethereum (ETH) futures contracts are among the most robust trading markets in the crypto space. You can use Ethereum futures to capitalize on short-term price moves, multiply your earnings using leverage, or hedge your existing investments.
Here’s what you’ll need to know before you get started with ETH futures contracts.
What Are ETH Futures Contracts?
ETH futures contracts are a trading tool to bet on whether the price of Ether (ETH), the coin that powers the Ethereum network, will go up or down in the future. A futures contract is an agreement to buy or sell an asset at a future date, although ETH futures use cash settlement instead, with no ETH ultimately changing hands.
ETH futures contracts refer to derivatives of ETH rather than ETH itself. A derivative ‘derives’ its value from the main asset, Ether (ETH) in this case. With a derivative, you aren’t trading the real asset, but rather a representation of that asset.
How do ETH Futures Work?
Futures, as a trading tool, have a long history in commodities markets where they offer a way to reduce pricing volatility for industries and opportunities for speculators to bet on price movements. Futures can also hedge existing trades, providing some insurance if short-term prices move against your held positions.
Generally, a futures contract is an agreement between buyer and seller to buy and sell an asset at a certain price at a certain point in the future. Some ETH futures contracts, such as Binance ETH futures and ETH futures traded on the Chicago Mercantile Exchange (CME), settle for their cash value, without any ETH changing hands between buyer and seller.
However, in many cases, ETH futures trades use a variation of this contract structure called perpetual futures, which do not expire and do not require you to take delivery. Perpetual futures typically track the real-time value of the asset throughout the trade.
Depending on the exchange you choose, you may have access to both traditional futures, which are contracts for the real asset (ETH) or a cash settlement, and perpetual futures, a derivative that does not require you to take possession of ETH or have an expiration date.
Example of ETH Futures Trading
ETH futures trades typically use perpetual contracts, so the price follows the spot market for the asset. This structure allows traders to speculate on the future price without taking delivery of the asset.
For example, let’s say you think the price of ETH is headed north, but you don’t want to buy the asset itself. You can use ETH futures to make the trade without buying any ETH at all. You also have the option of using leverage to multiply your earnings.
Typically, ETH futures use pairs, so you’re trading a certain asset to buy ETH contracts. For instance, you might trade with the ETH/USDT pair, which is a trade of Tether (UDST) for Ether (ETH).
Here are some examples with and without leverage:
| Non-leveraged trade | 3x leveraged trade | 10x leveraged trade | |
| Investment | $1,000 USDT | $1,000 USDT | $1,000 USDT |
| Trade value | $1,000 ETH | $3,000 ETH | $10,000 ETH |
| Profit with 10% price increase | $100 | $300 | $1,000 |
| Loss with 10% price decrease | ($100) | ($300) | ($1,000) 100% loss |
In the non-leveraged trade from the table above, if ETH increased in price by 10%, you’d make $100 on the trade. With 3x leverage, you’d multiply your earnings by three, giving you a $300 profit. Similarly, a trade with 10x leverage multiplies your profit by ten.
You can also see that it’s possible to lose the entire amount you’ve committed to the trade. The stakes are high, but so are your potential profits. On many platforms, you can trade without leverage or with a low leverage ratio to reduce risk until you feel comfortable.
Benefits of Trading ETH Futures
Traders can realize several benefits through trading ETH futures.
- Increased leverage: You can choose a leverage ratio to multiply your earnings.
- Improved liquidity: Compared to many other assets, ETH futures see more trading volume. Robust markets are more efficient, making pricing a better reflection of value.
- Enhanced flexibility: Speculate on the value of ETH without committing to holding and storing the asset. In addition, futures trades let you bet on the price in either direction.
- Hedged investments: Use ETH futures to hedge existing holdings if you think the market might change direction in the short term before resuming its long-term course.
Risks
- Loss of collateral: With ETH futures trading, it’s possible to lose 100% of your collateral.
- Increased volatility: Leverage increases volatility for ETH futures trades, creating a risk for margin calls or liquidation even with small changes in price.
- Possible loss of more than 100%: In leveraged situations, it’s possible to close the trade with a negative balance, meaning you’ve lost more than 100% of your invested capital.
Where to Trade ETH Futures
Traders have several options for trading ETH futures, although some don’t offer margin or futures trading in the US. Choices range from traditional brokerage accounts like Charles Schwab to centralized crypto exchanges (CEX) like Kraken or Binance to decentralized exchanges (DEX) like dYdX.
Brokerages such as Charles Schwab, TradeStation, and Interactive Brokers provide access to Chicago Mercantile Exchange (CME) traditional ETH futures with cash settlement. Trade sizes start at 0.1 ETH.
CEX choices may offer both traditional futures and perpetual futures. On a DEX, expect perpetual futures.
CEX ETH futures
DEX ETH futures
Traditional Futures Vs. Perpetual Futures
Neither traditional futures nor perpetual futures for ETH use physical delivery. However, Bakkt.com now offers Bitcoin futures with physical delivery, so ETH traders may see this option in the future.
The key difference in futures types is that traditional ETH futures use an expiration date whereas perpetual ETH futures do not.
| Traditional ETH Futures | Perpetual Futures | |
| Physical delivery | No | No |
| Expiration date | Yes | No |
| Funding rate | No | Yes |
| Hold indefinitely | No, must rollover to hold | Yes, but may pay funding fees |
| Available through investment brokers | Yes | No |
| Available through crypto exchanges | Yes | Yes |
| Minimum trade size | 0.1 ETH (CME), Typically $1 to $5 for crypto exchanges | Typically $1 to $5 |
Traditional Futures Markets
In many traditional futures markets, the contracts involve delivery of the asset at a predetermined price on the contract expiration date. However, traditional ETH futures use a different structure that replaces delivery with a cash settlement that happens on the expiration date, locking in unrealized gains or losses.
You can trade traditional ETH futures through brokerages that support Chicago Mercantile Exchange (CME) trades.
- Charles Schwab
- TradeStation
- Interactive Brokers
Some crypto exchanges also offer traditional futures with expiry.
- Binance.com
- Bybit.com (Inverse contracts)
- BitMEX.com
- BTSE.com
CEX vs. DEX Exchanges
A centralized exchange (CEX) runs on its own hardware, with the exchange management handled by a company. A decentralized exchange runs on a blockchain and does not have a central governing authority. Decentralized exchanges do not require identity documentation. But DEXs may restrict access based on region, so you may need to use a Virtual Private Network (VPN).
| CEX | DEX | |
| Identity verification (KYC/AML) | Yes | No |
| Self custody wallet | No | Yes |
| Fiat-funded purchases | Through exchange | Third-party providers |
Trade Perpetual Futures Through CEX Exchanges
Centralized exchanges are companies with centralized management and decision-making processes. Typically, to trade on a CEX, you’ll need to transfer your trading assets to the exchange’s wallet or fund your trades with fiat purchases made on the exchange.
In most cases, you’ll also need to provide identity verification as well. However, some exchanges, including Bybit.com and BTSE.com do not require Know-Your-Customer (KYC) verification for some transactions.
Traders can consider the following options.
- Qualified US traders:
- Non-US traders:
Trade Perpetual Futures Through DEX Exchanges
Decentralized exchanges do not require Know-Your-Customer (KYC) documentation, so there are no citizenship-based restrictions on the platform itself. However, local governments may have laws or regulations that govern access and exchanges may restrict access by IP location.
Think of decentralized exchanges as blockchain-based trading platforms that aren’t governed by a centralized authority.
Currently, traders can trade futures on these DEXs.
- dYdX.exchange (US IP addresses restricted)
- Futureswap.com (US IP addresses restricted)
How Does Initial Margin Work?
Initial margin refers to the amount of collateral (margin) you’ll need to start a leveraged trade. For example, to start a $10,000 ETH futures trade with 10x leverage, you’d need $1,000.
Similarly, if you wanted to purchase $10,000 in ETH futures at 20x leverage, you need $500 in margin. A $10,000 ETH futures trade with just 2x leverage would require $5,000, however.
Leverage and initial margin have an inverse relationship, with higher leverage requiring lower amounts of initial margin.
In effect, margin represents your equity in the trade. If the trade is losing money, your equity decreases. As equity decreases, maintenance margin, discussed next, becomes the first guard rail to keep your trade in play.
How Does Maintenance Margin Work?
Initial margin gets the trade started, but the maintenance margin keeps the trade in play. In most cases, the maintenance margin requirement is half of the initial margin requirement. If the trade is losing money, you may receive a margin call as your equity in the trade falls toward your maintenance margin.
A margin call is a notice (typically an email) to add more collateral to keep the trade active. If you can’t meet the margin call requirements, the exchange can liquidate your margin, ending the trade.
| Initial trade value | Leverage ratio | Initial margin | Maintenance margin | Margin call triggered |
| $10,000 | 2:1 (2x) | $5,000 (50%) | $2,500 (25%) | $7,500 |
| $10,000 | 10:1 (10x) | $1,000 (10%) | $500 (5%) | $9,500 |
| $10,000 | 20:1 (20x) | $500 (5%) | $250 (2.5%) | $9,750 |
In crypto margin trading, it’s unlikely to lose more than you’ve invested because the maintenance margin requirements are high and forced liquidations happen quickly in most cases. However, during sudden and dramatic price swings or when liquidity is low, you could end the trade with a negative balance, even with a forced liquidation.
Initial margin lets you lever up, choosing a leverage ratio and offering a percentage of the trade value as collateral. Maintenance margin serves as a safety, typically set at the halfway point, which prevents the trade from reaching negative equity in most cases.
How To Long ETH Futures
In a long ETH futures trade, you’re betting that the price will go up in the future. However, because you’re trading futures, you can also use leverage to maximize your profit on the trade.
For example, let’s say you want to put $1,000 to work and you think ETH will move up in price. You decide to use 3x leverage, which will triple your earnings if you’re right.
In this example, your $1,000 is your initial margin, which allows you to purchase $3,000 worth of ETH futures. If ETH goes up 5%, your trade is now worth $3,150 and your equity in the trade is $1,150.
$1,000 (initial margin) + $150 (unrealized gain) = $1,150
However, if the price of ETH dips, you lose some (or all) of your equity in the trade. Let’s say the price falls by 5%. The trade is losing $150, and your equity in the trade is down from $1,000 to $850. Fortunately, the maintenance margin for the trade is probably set at 50% of the initial margin, which gives you a $500 window before you get a margin call. You still have $350 as a buffer before reaching your maintenance margin.
$850 remaining equity – $500 maintenance margin = $350
Below is an example of a leveraged long ETH futures trade with an unrealized gain of nearly 60%. You’ll have the choice of trading at market price, resulting in taker fees, or placing a limit order, which adds liquidity to the marker and results in lower (maker) fees.
How To Short ETH Futures
When shorting ETH futures, the math is similar to the long trade example above, but instead, you’re betting on a downward move in price. A drop in price favors your trade and a rise in price results in a loss.
To open the trade, you sell contracts you don’t have. To close the trade, you’d need to buy the same amount of contracts to bring the trade to net zero. Some exchanges offer a handy button to close the trade instantly, buying or selling the required number of contracts.
Let’s say you used $1,000 on a 3x short leveraged ETH futures trade. You can short $3,000 worth of ETH using your $1,000 margin as collateral.
If the price of ETH goes down, you’ll earn the difference between the price at which you entered the trade and the new lower price. For example, if ETH is at $1500 at the beginning of the trade and drops to $1350, you’ve earned 10% ($150 per coin) on the trade. And since you used 3x leverage, you’ll triple your profits, earning 30%.
However, if the ETH price moves up, your trade loses money. In this example, you have $1,000 in initial margin and $500 in maintenance margin. A 10% move down trims your equity in the trade by $300, leaving a $200 buffer before you get a margin call.
In many cases, you won’t get any notice to add margin. Instead, the exchange will liquidate your trade to prevent negative equity.
Below is an example of a leveraged short trade for ETH. The entry price was $1549.75 with a current mark price (estimated price) of $1549.31. With leverage, this small profit can grow rapidly or fall just as quickly.
How Futures Contract Expiration Works
In traditional finance, futures trades use an expiration date for the contract. However, most crypto futures trades use perpetual futures, which are contracts designed without an expiration date.
You’ll still find traditional futures if you’re trading through a traditional broker or on some crypto exchanges. As an example, if you’re trading ETH futures on your Charles Schwab brokerage account, you’re accessing ETH futures on the Chicago Mercantile Exchange (CME). These futures contracts have an expiration on the last Friday of the contract month.
The expiration date is the last day trades can occur on the contract. As expiration approaches, traders typically have a few options:
- Offset the trade: Also called liquidating a position, offsetting refers to taking an opposite trade to cancel out the first trade. For example, if you are long one ETH in CME futures, purchasing a short contract for one ETH and with the same expiration date settles the trade.
- Rollover: On many exchanges. You can push back the date of the settlement by rolling the trade to another month in the future. In traditional futures, this technique uses an offset, as described above, followed by the purchase of a new contract for the desired month.
- Settlement: If you do nothing, the contract goes to settlement at expiration, locking in gains or losses for the trade. However, ETH futures on CME do not require delivery. Instead, the trade uses a cash settlement.
What is a Funding Fee?
Funding fees are payments between traders calculated using a market-driven funding rate. These fees, unique to perpetual futures, keep the futures price close to the actual asset price.
With perpetual futures, you can keep a trade open indefinitely, unless the trade gets liquidated. By contrast, with traditional futures, the contract goes to settlement on the expiry date. Funding rates are the magic formula that allows perpetual futures trades to avoid using expiration dates.
Funding rates can be either negative or positive, with long traders paying short traders when the funding rate is positive and shorts paying longs if the funding rate is negative. Typically, funding rates follow market sentiment, with a bullish market leading to positive rates and a bearish market leading to negative rates.
However, there’s a more complex formula at work under the hood that weighs a fixed interest rate and a variable premium, the latter of which attempts to stabilize the perpetual contract price against the asset price.
You can think of funding fees as a cost of holding your position. But depending on whether you’re long or short, the cost might be yours — or it may belong to someone else.
In this example from dYdX, you can see the funding rate varies. Longs paid shorts due to the positive funding rate.
Below, you can also see where the funding rate can go below 0% (negative), wherein shorts pay longs.
To calculate the funding fee, multiply the funding rate by the value of your position.
For instance, using the rate from the dYdX example: $1,000 position x 0.002359% = $0.005 (charged every hour). This example is low, however, and for some trades rates can be much higher.
Top Exchanges For Trading ETH Futures
ETH futures availability for trading can depend on location. We chose some standouts that bring unique features or expanded availability.
| Kraken.com | BTSE.com | Binance.com | dYdX.exchange | |
| KYC/AML | Yes | No KYC for crypto-only accounts | Yes | No |
| US trading | Qualified US Traders | No US IP address restrictions | Traders outside US | US IP addresses restricted |
| Pair | ETHUSD | ETHUSD | ETHUSDT, ETHBUSD | ETHUSD |
| Max Leverage | 5x | 100x | 20x (new accounts), 75x established accounts | 20x |
| Maker Fees | 0.0200% | 0.01% | 0.0200% (USDT), 0.0120% (BUSD) | 0.0200% (100k accounts) Free for low-volume traders |
| Taker Fees | 0.0500% | 0.05% | 0.0400% (USDT), 0.0300% (BUSD) | 0.0500% (100k accounts) Free for low-volume traders |
| Contract Type | Traditional and perpetual | Traditional and perpetual | Traditional and perpetual | Perpetual |
| Exchange Type | CEX | CEX | CEX | DEX |
Kraken.com
With a history dating back further than Ethereum itself, Kraken delivers a wealth of exchange know-how and a polished trading interface. For ETH trades, you can select perpetual contracts or traditional futures if you prefer. However, Kraken limits leverage choices to 5x, which in the sometimes volatile ETH market offers a healthy balance between enhanced profit opportunities and safety.
| Pros | Cons |
| Trade ETH futures in US Up to 5x leverage Multi-collateral wallet | Lower leverage than some exchanges Higher trading fees than some exchanges |
How to Trade ETH Futures on Kraken
Kraken makes onboarding easy.
Step 1: Open your account
Visit Kraken.com to open an account if you haven’t already. You’ll need to provide basic information about yourself.
Step 2: Upgrade your account to intermediate
Intermediate and Pro accounts can trade on margin, but you’ll need to be an Eligible Contract Participant (ECP), which generally includes traders with $10 million of discretionary investment capital
Self-certify to ECP requirements.
Step 3: Select your trade
Once approved for margin trades, visit Kraken’s futures portal to choose your trade and leverage.
BTSE
A favorite amongst futures traders, BTSE.com, Based in the British Virgin Islands, offers ETH perpetual futures as well as traditional futures.
If you plan to fund your account and withdraw with crypto as opposed to fiat, BTSE.com does not require KYC verification. BTSE also does not block US IP addresses. However, US regulations may prohibit crypto futures trading on unapproved exchanges.
| Pros | Cons |
| No IP US address restrictions Up to 100x leverage No KYC for crypto-only accounts | High fees for some withdrawal Less intuitive interface Complicated wallet |
How to Trade ETH Futures on BTSE
BTSE’s onboarding is a breeze, and the exchange does not require KYC verification if you don’t use fiat for deposits or withdrawals.
Step 1: Open your account
If you don’t have an account, visit BTSE. You can get started with just an email and username.
Step 2: Fund your account
If you want to continue without KYC, fund your account using crypto. You can connect your account to a MetaMask wallet or WalletConnect-compatible wallet.
Then, transfer funds to the futures account you wish to use. You can do this from wallet management or from the trading screen.
Step 3: Select your trade:
Choose your trade amount by the number of contracts or by percent of your balance and select your desired leverage for the trade.
Binance.com
Binance.com dominates the worldwide crypto futures market, but US traders must use Binance.us, which does not offer futures at this time. However, if you’re in an area that’s not restricted, you’ll enjoy massive liquidity for futures trades, letting you choose your entry points and exits with precision. Select from perpetual futures or traditional futures with expiry.
| Pros | Cons |
| High volume and liquidity Up to 20x leverage Low fees for BUSD-funded trades | Not available to US traders KYC required |
How to Trade ETH Futures on Binance.com
Binance has onboarding down to a science.
Step 1: Open and fund your account
Visit Binance.com to register your account. Note: US residents won’t be able to use Binance.com.
Complete KYC verification with Binance. You won’t be able to trade futures or spot without verification.
Then, fund your account by bank transfer, credit card or crypto transfer.
Step 2: Choose your trade
Choose from USD-M or COIN-M futures. USD-M settles in USDT or BUSD. Coin-M settles trades in crypto.
Then, select your trade amount and leverage.
dYdX
Perpetual futures make futures trading on decentralized exchanges possible, and dYdX has earned a stellar reputation in this category with full decentralization on its roadmap.
You’ll enjoy ample trading volume that ensures you’ll have small spreads and no trading fees for accounts with less than $100,000 in monthly trading volume.
Note that dYdX restricts US IP addresses, and as part of the terms of service, you’ll have to agree not to use a VPN to access dYdX from a restricted location.
| Pros | Cons |
| No KYCSuperb user interface Up to 20x leverage No trading fees for low volume | Lower leverage than some exchanges Less than intuitive funding Existing orders are difficult to access |
How to Trade ETH Futures on dYdX
As a decentralized exchange, onboarding for dYdX follows a different path. But if you’ve used MetaMask, you’ll find the process intuitive.
Step 1: Connect to a Wallet
Visit dYdX and then connect your wallet. Options include MetaMask, Coinbase wallet, and others.
Step 2: Agree to terms
Currently, dYdX isn’t available to users with IP addresses in certain regions. You’ll have to agree not to circumvent geographic restrictions.
Step 3: Fund your wallet
Transfer funds from your wallet to dYdX. You’ll have to pay gas fees unless you deposit $500 or more.
The good news is that trading is free until you reach $100,000 USD in monthly trading volume.
Step 4: Select your trade:
Choose the amount or value of your trade, as well as your desired leverage. The bottom of the trading screen shows a preview of your trade.
ETH Futures vs. ETH Options vs. Spot ETH vs. ETH Perpetual Futures
To trade on the price of ETH, you have four options. Spot trading is the most straightforward, being an immediate transfer in which the buyer takes delivery. ETH futures, ETH options, and ETH perpetual contracts all bet on the future price.
| ETH Futures | ETH Options | Spot ETH | Perpetual Futures | |
| Requires delivery of the asset | No, usually cash settlement | Options bring no obligation to buy or sell | Yes | No, usually cash settlement |
| Expiration date | Yes | Yes | N/A | No |
| Can use leverage | Yes | No | Yes | Yes |
| Funding rate cost | No | No | No | Yes |
| Margin account required | Yes | Yes | No | Yes |
| Liquidation risk | Yes | No | Yes (leveraged trades) | Yes |
| Real asset | No, derivative | Yes, if exercised | Yes | No, derivative |
ETH Futures
Traditional ETH futures use an expiry date. Traders can use a traditional brokerage account that offers access to CME futures, such as Charles Schwab. In many parts of the world, you can also access traditional (expiry) futures through some centralized exchanges, such as Binance.com.
| Pros | Cons |
| No delivery required Leverage available Access from broker accounts | Limited trading platforms Liquidation risk for leveraged trades Rollover fees and settlement costs |
ETH Perpetual Futures
With no expiration date, you can hold a perpetual futures contract indefinitely, but you may have to pay funding fees that can add up.
You’ll find perpetual futures, sometimes called perpetual swaps, on centralized crypto exchanges and decentralized exchanges.
| Pros | Cons |
| No delivery required Increased leverage available CEX and DEX trading options | Funding fees Liquidation risk Limited US exchange choices |
ETH Options
Options are just that, optional trades. ETH options act as a way to turn back time and make the trade you wish you’d made earlier — for a small premium.
You’re purchasing the option to buy ETH (call option) or to sell ETH (put option). But you’re not under any obligation to use the option. You can sell your options to another trader before expiration or let the options expire. Often, traders use options as insurance for existing positions, but you can also use options as a way to bet on the future price of ETH.
If you choose to exercise your options, you’ll have to buy (call) or sell (put) at the option price, with the final buy or sale being for delivered ETH. Like spot market trades, exercised options are transactions with delivery.
| Pros | Cons |
| Insurance for existing positions Small investment Preserves your options | May expire worthless Less liquidity as expiration approaches Few exchange choices for ETH options |
Spot ETH
Spot market trades refer to real time (on the spot) transactions with delivery. While you can trade spot ETH on both CEXs and DEXs, in most cases you won’t be able to use leverage. This can make spot trades a less efficient way to build trading profits. As a benefit, you’ll enjoy less risk than found with futures or even options trades.
| Pros | Cons |
| Wide availability Easy to understand Reduced risk | Must take delivery Limited leverage Limited diversification |
To Sum it Up
ETH futures offer a powerful way to capitalize on market movements whether large or small. As a trade-off, you face the potential risk of losing 100% of your equity in the trade.
Depending on your location, you can choose between brokerage accounts, centralized exchanges, or even decentralized exchanges. With choices of traditional ETH futures, perpetual futures, or even call and put options, there’s always a way to make a bigger bet on future ETH prices.
Frequently Asked Questions
- Can you trade Ethereum futures?
You can trade Ethereum futures in several ways. The most common way to trade ETH futures is through a centralized exchange such as Kraken.com or Bybit.com.
- What does ETH in futures mean?
ETH is the trading symbol for Ether, the coin that powers the Ethereum network.
- Where can I trade crypto futures?
Qualified US traders can trade crypto futures on Kraken.com.
- How much are Ethereum futures?
In most cases, Ethereum futures use perpetual contracts, a trading vehicle designed to track the spot price so that ETH futures prices approximate the value of ETH spot prices.
