Connect with us

LEARN HOW TO TRADE, BITCOIN, EOS, ETHEREUM, LIGHTBLOCKS MEDIA

get a dubai visa and apartment with bitcoin

cryptocurrency

A Brief View into Binance Delivery Contracts

Published

on

A Brief View into Binance Delivery Contracts
Join telegram Channel

LEARN HOW TO TRADE, BITCOIN, EOS, ETHEREUM, LIGHTBLOCKS MEDIA

Crypto volatility allows traders to take advantage of the crypto market and profit from buying and selling cryptocurrencies. Trading futures is one way to take advantage of the market. To make profits off cryptocurrencies, traders have to predict the price movement. In predicting price movement, a contract is necessary as traders are not buying the assets but price positions. Delivery contracts are just one of such contracts.

Let’s talk about delivery contracts, how they work, and the difference between them and perpetual contracts.

What is a Delivery Contract?

A delivery contract is a type of futures contract in Binance where both parties to a contract agree to carry out transactions at the price of the futures at a specific time. Actions based on the contracts are time-sensitive. This means that the price movement prediction must happen during the time specified within the contract.

The time for the delivery contract and the predicted price movements are the two core components of a delivery contract. They determine the execution of the contract and make sure that the parties involved in the contract agree on the terms and conditions stated in the contract. 

Delivery contracts are classified into four groups based on their delivery time. They include;

  1. Current Week Delivery Contract: This is a short-term delivery contract that is completed within a week. It’s usually delivered on the Friday of the current week.  
  1. Next Week Delivery Contract: The next-week delivery contract is the same as the current one, but with an extension. The delivery takes place the following week after the trader creates the contract.
  1. Current Quarter Delivery Contract: In this contract, traders must dictate the contract within the delivery date every quarter of a year. The delivery date could be at the end of March, June, September, or December.
  1. Next Quarter Delivery Contract: In the next quarter delivery contract, the delivery contract takes place in the next quarter. If a trader opens a contract during a certain quarter, the next quarter will be the delivery date.

What is the Difference Between a Delivery Contract and a Perpetual Contract?

Although perpetual and future contracts originate from Bitcoin futures contracts, several differences exist between a perpetual contract and a delivery contract.

One of such differences is the time factor. Unlike delivery contracts, perpetual contracts have no time constraint. A trader can open a perpetual contract for as long as they want. However, a delivery contract is settled at the agreed time stated in the contract. Also, delivery contracts are less expensive and risky compared to perpetual contracts.

Another difference is the settlement fee after the expiration of a delivery contract. The settlement fee in a delivery contract varies per contract. However, a perpetual contract does not have a one-time settlement fee.

What are the Benefits of Delivery Contracts?

There are a few benefits to using delivery contracts. One of such benefits is that traders can maximize their trading profits through leverage, stop loss, and other avenues. Traders can also get their profits at any time designated in the contract. Traders can settle for profits within a quarter or within the next quarter delivery. 

One more benefit is that traders do not have to deal with daily funding fees with delivery contracts. This makes them a cheaper route towards enjoying futures trading gains, especially when compared to other options such as perpetual contracts. 

How do Delivery Contracts work?

A delivery contract involves trading in the futures market for a specific. Based on your analysis, you can either long or short your trading positions, and your contract expires after a specified time. Once the expiration date arrives, the terms of the contracts are settled based on the current situation in the crypto market.

What is a Delivery Contract’s Expiration?

The core feature of a delivery contract is its timeline. A delivery contract expires once it exits the timeline stated in the contract. Once the contract expires, it is settled based on the situation in the crypto market, and a settlement fee is automatically applied.

A delivery contract expiration signals the end of the current contract entered with the exchange.

How to Trade Delivery Contracts on Binance?

Binance currently offers quarterly delivery contracts on the platform as traders can create and settle contracts at a defined delivery date.

For example, opening a quarterly BTC/USDT contract requires holding some BTC as a margin. Settlement of this type of contract uses the underlying asset. Therefore, when the contract expires and a profit is realized, the profits will add to the BTC you hold on the exchange.

The processing fee is automatically deducted when Binance’s delivery contract expires based on the prescribed buyer fee. The settlement price is usually the current market price when the contract expires. The exchange deducts the settlement fee from the realized profit and loss and transfers the remaining part to the trader’s margin account.

Conclusion 

Although delivery contracts are not popular, they present crypto traders with an opportunity to profit from the crypto market. Because of its rigid nature and time constraint, traders cannot allow the speculative nature of cryptocurrencies to affect them as they can’t close their positions until the conditions set in the contract are met. 

Visit Binance to get started with crypto trading or Binance Future’s web to know more about delivery contracts.

swap crypto anonymously

Continue Reading
Advertisement

lightblocks lifestyle plan

Click to comment

Leave a Reply

Your email address will not be published.

Copyright © 2020 LightBlocks