📖 What are Quarterly Futures?
Quarterly futures are derivative contracts with a fixed expiry date, typically occurring every three months (quarterly). They allow traders to speculate on the price of a cryptocurrency at a specific future date. Unlike perpetual futures, which have no expiry, quarterly futures have a defined settlement date when the contract is settled in cash at the spot price of the underlying asset.
Quarterly futures are one of the oldest forms of futures trading in crypto, originating from traditional finance where quarterly and monthly futures are standard. They are used by traders for hedging, basis trading, and long-term price speculation. While perpetual futures have become more popular for active trading, quarterly futures remain an important instrument for institutional and sophisticated retail traders.
Quarterly futures are the traditional futures contract adapted for crypto. They are predictable, have no funding rates, and converge to the spot price at expiry. This makes them ideal for strategies that benefit from price convergence and predictable settlement dates.
⚙️ How Quarterly Futures Work
Quarterly futures operate on a few key principles that make them distinct from perpetual futures.
Core Mechanics
- Fixed Expiry Date: The contract expires on a specific date, typically the last Friday of the quarter (March, June, September, December).
- No Funding Rate: Unlike perpetual futures, there are no periodic payments between longs and shorts. The contract price is driven purely by supply and demand.
- Cash Settlement: At expiry, the contract is settled in cash. The difference between the contract price and the spot price is credited or debited to the trader's account.
- Price Convergence: As the expiry date approaches, the futures price converges toward the spot price. This is a key feature that enables basis trading strategies.
You open a long BTC quarterly futures contract at $60,000 with an expiry in 3 months. At expiry, the spot price is $65,000. Your profit is ($65,000 - $60,000) × 1 = $5,000 (before fees). If the price had fallen to $55,000, your loss would be $5,000.
📅 Expiry and Settlement
The expiry and settlement process is a critical aspect of quarterly futures trading.
Expiry Schedule
- Quarterly Expiry Dates: Typically the last Friday of March, June, September, and December.
- Time of Settlement: Usually at 08:00 UTC on the expiry date.
- Contract Rollover: As one contract expires, the next quarter's contract becomes available for trading.
Settlement Process
- Cash Settlement: The contract is settled in cash. No physical delivery of the asset occurs.
- Settlement Price: The spot price of the underlying asset at the time of expiry is used for settlement.
- Profit/Loss: The difference between the contract price and the settlement price is credited or debited to the trader's account.
If you hold a quarterly futures position until expiry, your position will be automatically closed and settled. You cannot hold it beyond the expiry date. If you want to maintain exposure, you must open a position on the next quarter's contract.
📊 Quarterly vs Perpetual Futures
Understanding the differences between quarterly and perpetual futures is essential for choosing the right instrument for your strategy.
| Feature | Quarterly Futures | Perpetual Futures |
|---|---|---|
| Expiry Date | Fixed (every 3 months) | None (no expiry) |
| Funding Rate | No | Yes (every 8 hours) |
| Price Convergence | Converges to spot at expiry | Funding rate keeps price aligned |
| Popular For | Hedging, basis trading, long-term speculation | Active trading, scalping |
| Leverage | Up to 50x–100x | Up to 100x+ |
| Cost | No funding rate (but may have wider spreads) | Funding rate (variable) |
| Liquidity | Moderate to high (higher near expiry) | Very high |
Quarterly futures are better for hedging, basis trading, and strategies that benefit from predictable expiry and no funding rates. Perpetual futures are better for active trading, scalping, and strategies that require flexibility and high liquidity.
📊 Basis Trading with Quarterly Futures
Basis trading is a popular strategy that leverages the difference between the futures price and the spot price (the "basis"). As the expiry date approaches, the futures price converges toward the spot price, creating an opportunity to profit from this convergence.
How Basis Trading Works
- Identify the Basis: The basis is the difference between the futures price and the spot price. Typically, futures trade at a premium (contango) because of the cost of carry.
- Cash-and-Carry Arbitrage: Buy the spot asset and sell the futures contract. As the futures price converges to the spot price at expiry, the basis narrows, generating a profit.
- Reverse Cash-and-Carry: Sell the spot asset (or short it) and buy the futures contract. This profits when the basis widens (backwardation).
BTC spot price is $60,000. The next quarterly futures price is $61,000. The basis is $1,000. You buy 1 BTC spot and sell 1 BTC quarterly futures. At expiry, the spot price is $60,500. Your profit is the basis minus any fees: ($1,000 - $500) = $500. This is a market-neutral strategy that profits from convergence.
Basis trading is a low-risk, market-neutral strategy that captures the premium of futures over spot. It is commonly used by institutional traders and hedge funds to generate consistent returns with limited directional risk.
🛡️ Using Quarterly Futures for Hedging
Quarterly futures are an effective tool for hedging spot positions against adverse price movements.
Short Hedge
- Scenario: You hold BTC spot and are concerned about a price drop.
- Action: Sell BTC quarterly futures of equivalent value.
- Outcome: If the spot price drops, the loss on your spot position is offset by the profit on your futures short position.
Long Hedge
- Scenario: You plan to buy BTC in the future and are concerned about a price increase.
- Action: Buy BTC quarterly futures of equivalent value.
- Outcome: If the spot price rises, the gain on your futures long position offsets the higher cost of buying in the spot market.
Quarterly futures are ideal for hedging because they have no funding rates and converge to spot at expiry. This makes the cost of hedging predictable and transparent.
⚠️ Risks of Quarterly Futures
While quarterly futures are less risky than perpetual futures in some ways, they still carry significant risks.
If the market moves against you, your position can be liquidated, resulting in the loss of your entire margin.
Crypto markets are highly volatile. Sudden price swings can trigger liquidation quickly.
If you hold until expiry, you are forced to settle at the spot price. This may be unfavourable if you wanted to maintain the position.
Liquidity can be lower for contracts far from expiry. This can lead to wider spreads and slippage.
Quarterly futures are not suitable for beginners. They require a strong understanding of leverage, expiry mechanics, and market dynamics. If you are new to futures, start with lower leverage and consider perpetual futures first.
🚀 How to Start Trading Quarterly Futures
Follow these steps to start trading quarterly futures on a crypto exchange:
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1
Choose a Reputable Exchange
Select an exchange that offers quarterly futures. Popular options include Binance, Bybit, OKX, and Kraken.
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2
Complete KYC and Enable Futures
Most exchanges require identity verification. Then, enable quarterly futures trading in your account settings.
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3
Transfer Funds to Futures Wallet
Move assets from your spot wallet to the futures wallet. This will be used as margin for your positions.
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4
Choose Your Contract
Select the quarterly futures contract you want to trade (e.g., BTC-USDT Quarterly). Pay attention to the expiry date.
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5
Set Leverage
Choose your leverage. Start with low leverage (2x–3x) to understand the mechanics.
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6
Place Your Trade
Decide on long or short. Set a stop-loss to limit risk. Enter the order.
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7
Monitor, Roll, or Close
Monitor your position. If you want to maintain exposure beyond expiry, you need to "roll" the position — close the current contract and open one on the next quarter.
If you're planning to use quarterly futures for hedging, make sure the contract's expiry date aligns with your hedging horizon. Otherwise, you may need to roll the position, which incurs additional costs.
❌ Common Mistakes in Quarterly Futures Trading
Avoid these errors that can lead to significant losses:
- Forgetting about expiry. If you hold a position until expiry, it will be automatically settled. This may be unfavourable if you wanted to maintain the position.
- Not rolling positions. If you want to maintain exposure beyond the expiry date, you must roll the position. Failing to do so closes your exposure.
- Using too much leverage. High leverage amplifies losses and increases liquidation risk.
- Ignoring basis risk. The futures price may not perfectly track the spot price, especially far from expiry. This can affect the effectiveness of hedging.
- Not using a stop-loss. Without a stop-loss, a sudden market move can wipe out your position.
- Trading without a plan. Entering trades without a clear entry and exit strategy.
Not understanding the expiry date. Quarterly futures are fundamentally different from perpetual futures because they have a fixed expiry. Treating them like perpetuals can lead to unexpected settlement and losses.