Crypto Derivatives 101: No Coins Required, but the Obligations Still Bite

Crypto derivatives are contracts whose value tracks an underlying asset like bitcoin or ether, according to an explainer from The Defiant. Traders use them to make or lose money on price swings without buying the coin itself — either to offset a risk they already hold or to bet on where prices go next. Hedging and speculation can look identical on paper; the difference is intent, not the instrument.

Futures lock both buyer and seller into a settlement at an agreed price, so obligations run in both directions. As the Commodity Futures Trading Commission frames it, a cash-settled future moves money rather than delivering cryptocurrency. CME's Bitcoin futures follow that pattern: expiring positions settle in cash against a bitcoin reference rate, with no coins changing hands. A long profits when the futures price climbs, a short when it drops — before costs.

Perpetual futures, or perps, skip the expiration date but keep the obligations. Holders still post collateral and settle gains and losses, and a filing for OG.com Markets' SEI contract dated Oct. 8, 2026 specifies no expiry and dollar settlement instead of SEI token delivery. To keep the contract price tethered to spot, perps lean on funding — recurring payments between longs and shorts. Under Hyperliquid's rules, positive funding means longs pay shorts, negative flips it. Funding is not a trading fee, and its direction can swing.

Options work differently: the buyer gets a right, not a duty, and pays a premium for it. A call grants the right to buy at a set strike; a put grants the right to sell, per CME's options guide. The seller pockets the premium and inherits the matching obligation, with exercise on the buyer's side and assignment on the seller's. European-style options can only be exercised at expiry, American-style ones beforehand — and CME's monthly Bitcoin options, once exercised, spawn futures positions that settle in cash right away.

The risk math is where things get sharp. A fully paid option bought outright limits the buyer's loss to the premium, fees aside — though that whole premium can vanish, and any futures position created by exercise carries its own obligations. Sellers face no such cap and can be hit with margin requirements. Margin, the explainer stresses, is collateral backing a trading obligation, not the price of the underlying coin: initial margin opens a position, maintenance margin keeps it alive.

Leverage then amplifies everything, letting traders control exposure bigger than the money they put up. If the account drops below the required level, expect a collateral call or liquidation — a forced close. The CFTC warns that leveraged futures losses can exceed the initial investment, and a perpetual's lack of an expiry date is no promise of survival: thin collateral can close the position anyway.