For beginners just entering the market, terms such as “spot,” “perpetual,” “coin-margined,” and “options” on the trading interface can often be confusing. In fact, these concepts are just different “trading rules.”
We compare this market to a massive financial supermarket, starting from the bottom logic to help you understand.
First Stop: Spot Trading —— The Foundation of Trading
[Definition]
Spot trading is the most traditional form of trading: cash for goods.
You pay for one asset (for example, USDT) and immediately gain ownership of another asset (for example, BTC).
It’s like buying apples at the supermarket; once you pay, the apples are in your pocket, and they totally belong to you.
[Core Features]
- Low Risk: There is no concept of “liquidation”; as long as the coin does not go to zero, you can hold it indefinitely.
- One-Way Profit: You can only make money when the price goes up.
[Common Trading Pair Examples]
- BTC/USDT: Buy BTC with USDT
- ETH/BTC: Buy ETH with BTC
Example:
You use 1000 USDT to buy BTC
Rises to 1200 → Profit 200
Falls to 800 → Loss 200
👉 Suitable for beginners to practice first step
Second Stop: Contract Trading —— Trading “Price Expectations”
[Definition]
You are not buying coins, but an agreement. You and the counterparty agree: at some specified time in the future, to buy or sell a certain asset at a certain price.
You can:
- Go Long (Profit from rising)
- Go Short (Profit from falling)
- Use leverage to amplify returns and risks
1. Perpetual Contracts
[Definition]
A contract with no expiration date; as long as there is sufficient margin in your account, it can be held indefinitely.
[Core Mechanism: Funding Rate]
To keep the contract price close to the spot price, both longs and shorts will periodically pay a funding fee.
- Longs Strong → Longs Pay
- Shorts Strong → Shorts Pay
Typically settled every 8 hours.
[Common Trading Pairs]
- BTCUSDT Perpetual
- ETHUSDT Perpetual
2. Delivery Contracts
[Definition]
A contract with a specified expiration date (weekly, quarterly, etc.); upon expiration, regardless of price, the system will enforce liquidation.
[Features]
- No funding rate
- Fixed delivery time
- Prices may be at a premium or discount
More commonly used for institutional arbitrage or hedging.
[Examples]
- BTC Current Quarter
- BTC/ 27MAR26
Third Stop: Settlement Basis —— Are You Earning “Dollars” or “Coins”?
In contract trading, you need to decide: what to use as margin? How to settle profits and losses?
This is the “basis.”
1. USDT Basis (U-Margin)
[Definition]
Using USDT as margin, and profits and losses are settled in USDT.
[Advantages]
- Profits and losses are straightforward (how much U you earned is how much money you made).
- Stable fiat value (USDT is pegged to the US dollar)
Example:
You use 1000 USDT to open a 10 time BTCUSDT long position; if it rises 1% = you earn 10% (100 USDT)
Losses are also in USDT
👉 Most friendly for newcomers, simple risk calculations
2. Coin Basis (Coin-Margin)
[Definition]
Using BTC, ETH, etc. as margin, and profits and losses are settled in that currency. For example: using BTC as margin, trading BTCUSD contracts.
[Risk Characteristics]
- When rising: Contract profit + Margin appreciation (dual profit)
- When falling: Contract loss + Margin depreciation (dual loss)
Suitable for traders who are bullish in the long term on a particular coin and wish to “roll coins.”
[Example]
- BTCUSD Perpetual (Coin Basis)
If BTC rises, not only do you profit from the contract, but your margin also appreciates
Fourth Stop: Options Trading —— Buying and Selling a “Right”
[Definition]
Options give you the right (but not the obligation) to buy or sell an asset at an agreed price at a specific time in the future.
- Call Option: Bullish on future price increase, buying a “right to buy at a cheaper price.”
- Put Option: Bearish on future price decline, buying a “right to sell at a higher price.”
[Features]
- Limited loss, unlimited profit (for the buyer): Your maximum loss is the “premium” (deposit) you paid.
- Non-mandatory: If the price is unfavorable at expiration, you can choose not to exercise the option and let it expire.
- Leverage effect: Using a small amount of money (premium) to seek high returns from drastic asset fluctuations.
[Example]
- BTCUSD-20261226-25000-C
Imagine you are interested in a 1 million house, but worry that housing prices will rise dramatically next month, so you pay 10,000 to the landlord as a “deposit” (premium), agreeing that next month you can still buy this house for 1 million.
- If the housing price rises to 1.5 million next month: You exercise the right to buy at 1 million, earning 490,000 (after deducting the 10,000 deposit).
- If the housing price falls to 800,000 next month: You choose to “back out” and forfeit the 10,000 deposit, then buy cheaper on the market. Your loss limit is that 10,000.
Comprehensive Comparison Table (Must Read for Beginners)
- Spot is “rice,” while contracts are “spice”: Spot should occupy most of your position, while contracts should be used as a small amount of seasoning or speculative tools.
- Beginners should choose U Margin: Until you learn to calculate complex coin price fluctuations, please use USDT as the basis for trading.
- Beware of leverage: Contracts and options carry leverage properties, which can amplify your profits but can also reduce your principal to zero in seconds.
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