Exposure through a contract
A derivative links contractual payments or delivery obligations to an underlying price, rate or index. Holding the contract does not necessarily mean owning the reference asset. Contract size, settlement currency, expiry and the identity of the counterparty determine the exposure. Two instruments with the same underlying name can behave differently because their maturity dates, pricing references and settlement rules are different.
Futures and perpetual structures
Dated futures have a defined maturity and settlement process. Perpetual contracts have no fixed expiration and commonly use periodic funding payments between long and short positions to help align prices with a spot reference. Funding can change direction and accumulate while a position remains open. It should be modeled separately from trading commissions, and its formula and payment intervals must come from the actual contract specification.
Margin does not cap loss
Initial margin supports a position whose notional exposure may be much larger. If an illustrative 1,000 exposure is supported by 100 of margin, a 5% adverse move represents 50 before fees and other adjustments. Maintenance requirements can force a position to close before all margin is exhausted. Price gaps and contract terms may produce additional liability; posted collateral should never be assumed to define maximum loss.
A contract review workflow
Read the settlement method, margin schedule, reference-price methodology, liquidation rules and default arrangements together. Stress a sudden price move, higher funding costs and an unavailable market, rather than testing only gradual changes. This educational library does not establish access to a derivatives venue through FYLU. Provider identity, authorization, product eligibility and approved terms must be established before any transaction service is described as available.