Whether you are just starting or looking to sharpen your trading knowledge, this glossary breaks down the essential terms you may encounter when trading perpetuals on Robinhood.

Base asset The asset being traded in a perpetual contract. For example, in a BTCUSD contract, BTC is the base asset.

Collateral The funds you post to open a position. Collateral is required to open a perpetual regardless of whether leverage is applied, and is used to cover potential losses.

Collateral required The minimum amount required to open a position.

Collateral tier Determine how collateral requirements are calculated as your position size changes. Collateral tiers are based on the total notional position size in a contract. As your position size changes, different collateral tiers may apply.

Contract size The notional quantity or value of each contract. For example, a 1 BTCUSD perpetual contract represents 1 Bitcoin in value.

Excess collateral The portion of your collateral that isn't currently required to support your open position. You can use it to add to your position or remove it. The more excess collateral you have, the further your positions are from liquidation risk.

Exposure The total value of your position including leverage. Since exposure typically exceeds the underlying collateral, small price movements can result in outsized effects on position performance.

Funding rate A periodic payment between long and short traders that helps keep the contract price in line with the underlying asset. Funding payments occur every 8 hours (00:00, 08:00, and 16:00 UTC). A positive rate means long positions pay shorts; a negative rate means shorts pay longs. This can be found in your settlement history.

Leverage The multiplier that determines the position size relative to the amount of collateral used. Higher leverage increases both potential gains and losses, and moves the liquidation price closer to the current market price.

Liquidation If your position drops in value and your collateral is no longer enough to support it, your position may be partially or fully closed (liquidated) by the partner venue. This protects against further losses and fees apply. Check out Perpetual futures liquidations for more information.

Long/short position

• Long: You believe the asset will go up in value
• Short: You believe the asset will go down in value

With perpetuals, you can hold either position indefinitely, if you meet collateral requirements.

Minimum collateral required The minimum amount of collateral you need to keep your position open. Falling below this amount will trigger liquidation.

Perpetuals buying power The amount of money you can use to buy perpetual futures. If you have any open positions, you may have additional available buying power only for that position based on any excess collateral that you add or any settled profits.

Quote currency The currency used to price the perpetual contract, such as USD.

Settlement Perpetuals are typically settled in cash, not in the actual asset. You don’t need to own the asset to trade it. Settlements occur every 15 minutes.

Take profit/stop loss Risk management tools triggered by price levels to help secure potential profits or limit potential losses. When a take profit or stop loss level is reached, these orders will execute as market orders for the specified quantity.

Tick size The smallest possible price movement in the market. For example, Bitcoin moves in $1 increments.

Total collateral The amount of collateral currently available to support an individual position. Increasing or decreasing total collateral will impact the position health and liquidation risk of that position.

Perpetuals are complex derivative products, and trading involves significant risk and is not appropriate for all investors, particularly for perpetuals referencing assets which experience volatile price movements. Further, leveraged trading is risky as it can amplify the speed of your losses and increases the chance of you losing all of your initial investment. Please carefully consider if investing in such financial instruments is appropriate for you in light of your specific experience, risk tolerance, and financial situation. Restrictions and eligibility requirements apply.