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1. A trader has $5,000 in their account and uses 10x leverage to trade a cryptocurrency perpetual futures contract. The trader opens a $50,000 long position on a cryptocurrency currently priced at $50 per coin (1,000 coins). Assume the funding rate is neutral (neither favoring longs nor shorts). If the cryptocurrency price spikes to $75, and the funding rate remains neutral, what is the trader's percentage return on their initial capital, assuming no other fees or funding costs?

2. If the cryptocurrency price falls to $30, what is the trader's percentage loss on their initial capital, assuming no fees or funding costs?

3. What is a key difference between the economics of perpetual futures contracts and options contracts in cryptocurrency derivatives markets, and how does this impact their risk profiles?

I/We request and agree to be categorised as an Elective Professional Client generally, which will allow Kraken MTF to arrange and promote services related to crypto asset derivative contracts.

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See the <a href="https://assets-cms.kraken.com/files/51n36hrp/facade/a04632a8c87dafb19e1f724564be60b4183c672c.pdf" target="_blank" rel="noopener noreferrer" style="text-decoration: underline;">protections</a>

I/We confirm that I have read and understood the protections that are lost by being categorised as an Elective Professional Client, and am aware of the consequences of losing such protections.

9. How does the higher volatility of cryptocurrencies compared to traditional securities impact the risk profile of derivatives with cryptocurrency underlyings, such as perpetual futures or options contracts?

4. You are trading a highly volatile cryptocurrency perpetual futures contract with 10x leverage. The exchange requires a maintenance margin of 25%. The cryptocurrency price is currently $100, and your initial equity is $5,000. During a sudden market drop, the price falls to $85 within minutes. What should you understand about the likelihood and timing of a margin call in this scenario?

5. Which of the following best describes a perpetual futures contract in cryptocurrency derivatives markets?

8. When actively trading cryptocurrency derivatives, such as perpetual futures or options, which of the following strategies demonstrates a high level of experience in managing both market risks and trading costs?

6. In the context of perpetual futures contracts in cryptocurrency, what does the funding rate mechanism indicate, and how does it reflect market sentiment?

7. When trading cryptocurrency derivatives, such as perpetual futures or options contracts, which of the following is an essential part of managing your position effectively?

See <a href="https://assets-cms.kraken.com/files/51n36hrp/facade/4df062fc549499e19cefb758e26fdfcd12afeeda.pdf" target="_blank" rel="noopener noreferrer" style="text-decoration: underline;">Kraken MTF Terms of Service</a> and <a href="https://www.kraken.com/legal/digital-assets-brokerage-services" target="_blank" rel="noopener noreferrer" style="text-decoration: underline;">Digital Asset Brokerage Services Agreement</a>.

I/We have read and accepted the Kraken MTF Terms of Service and Digital Asset Brokerage Services Agreement.

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You will need to meet at least 2 of the following criteria to be categorised as an Elective Professional Client. 

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Unregulated Institutional Investor whose main activity is to invest in financial instruments

, you need to upload documents proving that your main business activity is investing in financial instruments. (Financial instruments include transferable securities (including shares and securitised debt), money-market instruments, units in collective investment undertakings, and derivatives.)

 that manages public debt, a central bank, an international and supranational institution such as the World Bank, the IMF, the ECB, the EIB or another similar international organisation, Please provide evidence of its status as a national, regional, government or public body.

Please provide evidence of its status as a national, regional, government or public body.

In order to verify that you are a Large Undertaking, you need to upload documents that prove you meet at least 2 of the following requirements on a company basis.

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a. 500% 

b. 150%

c. 50%

a. 100%

b. 200%

c. 400%

a. Perpetual futures contracts allow traders to speculate on price movements without an expiration date and require margin to avoid liquidation, while options contracts involve the right, but not the obligation, to buy or sell at a specific price by a set expiration date, limiting risk to the premium paid.

 b. Both perpetual futures contracts and options contracts require traders to maintain a margin to avoid liquidation, and neither product involves expiration dates, making them equally risky in volatile markets.

c. Options contracts are inherently riskier than perpetual futures contracts because they involve higher leverage and require traders to settle their contracts even if the market moves against them.


a. A margin call will only occur if the cryptocurrency price remains below the maintenance margin threshold for a prolonged period, giving the trader enough time to deposit additional margin.

b. A margin call is unlikely during such a rapid price drop because exchanges consider temporary volatility and only issue margin calls after market conditions stabilize.

c. A margin call can occur almost immediately during a sharp price drop because the trader's equity falls below the maintenance margin requirement. The greater the volatility of the cryptocurrency, the higher the risk of liquidation due to rapid price changes, leaving little time to deposit additional funds.


a. A perpetual futures contract is an agreement to buy or sell a cryptocurrency at a fixed price on a specific date in the future, but it uses a funding rate to adjust the price until expiration.

b. A perpetual futures contract is a type of derivative that allows traders to speculate on the price of a cryptocurrency without an expiration date, using a funding rate mechanism to align with the spot market price.

c. A perpetual futures contract is a trade that lets traders buy or sell cryptocurrencies continuously at the market price, similar to spot trading but with leverage and periodic funding rate adjustments.

a. When the funding rate is positive, it means short positions are paying long positions, indicating bearish market sentiment. A negative funding rate indicates that long positions are paying short positions, reflecting bullish market sentiment.

b. When the funding rate is positive, it means long positions are paying short positions, indicating bullish market sentiment. A negative funding rate indicates that short positions are paying long positions, reflecting bearish market sentiment.

c. The funding rate mechanism simply ensures the contract price stays close to the spot price and does not provide any indication of market sentiment.

a. Actively managing margin levels to avoid liquidation in perpetual futures, and for options, ensuring positions are closed or adjusted before expiration to avoid unintended assignment, settlement, or loss.

b. Understanding the funding rate mechanism in perpetual futures, as it affects the cost of holding long or short positions over time, and for options, being aware of how implied volatility and time decay impact the value of your position.

c. Relying on fixed fees and static price movements to predict your profit or loss in any market condition.

a. Relying on high leverage to maximize profits during favorable price movements, avoiding unnecessary fees by minimizing trade adjustments, and holding options contracts to expiration for maximum returns.

b. Avoiding the use of complex strategies or tools like stop-loss orders or hedging, instead focusing solely on directional trades and limiting the use of leverage to prevent liquidation.

c. Monitoring funding rates in perpetual futures to optimize holding costs, using stop-loss orders to limit downside risk, and employing delta-neutral strategies like selling options or hedging with spot trades to manage volatility exposure.

a. The higher volatility of cryptocurrencies increases the risk of rapid price swings, which can lead to more frequent margin calls, higher liquidation risks for perpetual futures, and significant premium costs for options contracts. Traders must carefully manage leverage and position sizing to mitigate these risks.

b. The higher volatility of cryptocurrencies means traders need to be more cautious, but it has limited impact on derivatives risk since the mechanics of perpetual futures and options contracts remain the same regardless of the underlying asset.

 c. Higher volatility in cryptocurrencies can create opportunities for quick profits in derivatives trading, but it also significantly raises the potential for sudden losses, making it essential for traders to use lower leverage or hedge their positions effectively.

Crypto asset derivatives services are provided by Payward Digital Solutions Limited, which is licensed by the Bermuda Monetary Authority (RN: 202403268) to conduct digital assets business in and from Bermuda. These services are not regulated or covered by investor protection measures in the UK. Access to these services is arranged by Crypto Facilities Limited, which is regulated and authorised by the Financial Conduct Authority (FRN: 757895) to make arrangements with a view to transactions in investments. This page is directed at investment professionals only, and must not be acted on or relied on by other persons. Investment activity to which this page relates is available to, and will be engaged in with, investment professionals only.