By John, Founder & CEO, TradeShield Labs
On November 3, the US Commodity Futures Trading Commission said perpetual futures on individual stocks can trade on CFTC-registered exchanges for the first time (CFTC statement). The contracts were deemed approved as security futures, so they fall under the regulatory frameworks of both the CFTC and the SEC (CFTC press release). Kalshi listed perps on four individual stocks the same day (Kalshi).
The approval is already being challenged in court. An industry group, the Capital Markets Alliance, whose members include Cboe, Citadel Securities and the Healthy Markets Association, sued in federal court in New York on November 3 to vacate it (Cboe). The judge denied the group's request for a temporary restraining order the same day, so trading continues, but wrote that the group is likely to succeed on its claim that the CFTC lacked authority to approve the contracts. Further briefing is scheduled for November 6 and November 10 (court docket). The rules around this product could still change.
I'm not here to tell you whether that is good or bad, or what to trade. I want to talk about the one thing that makes perps feel exciting and the one thing that hurts people most: leverage.
What a perp actually is
A perpetual future is a futures contract with no expiration date. Instead of settling on a fixed day, the people who are long and the people who are short swap periodic "funding" payments that keep the contract price close to the underlying price. You don't own the shares. You trade a contract that tracks the stock's price, usually with leverage (Kalshi Help Center).
For years this product lived mostly on crypto venues outside the US. MarketWatch called it "a trendy crypto-native trading product" that "exploded in popularity on offshore venues" (MarketWatch). Now the same mechanics are pointed at familiar company names. That familiarity is exactly why the lesson matters.
Lesson 1: Leverage changes the size of the move, not the odds
Leverage does not make you more right. It makes being right or wrong count more.
Here is the plain math, before fees and funding. Put up $1,000 with no leverage, and a 5% move against you costs $50. Put up the same $1,000 at 10x, and you control $10,000 of exposure. The same 5% move now costs $500, half your stake. At 20x, a 5% move costs the whole $1,000. In practice, a leveraged position is usually liquidated before the full stake is gone.
The first US stock perps cap leverage lower than that. Kalshi's first four launched with a maximum of 4.9x (Bitcoin Magazine). At 4.9x, that $1,000 controls $4,900, and a 5% move costs $245, about a quarter of your stake. Kalshi's own example shows that at 4x, a 25% drop wipes out the entire margin (Kalshi Help Center).
Single stocks can jump on earnings, guidance or other news. With leverage, one ordinary news day can do a lot of damage.
Lesson 2: Liquidation is a price, not a feeling
On a leveraged position, there is a price at which your position can be closed out for you. It doesn't care that you planned to hold, or that the move "should" reverse. If your account falls below the maintenance margin, the position can be liquidated, and Kalshi notes that in exceptional conditions losses can exceed the margin you posted (Kalshi Help Center).
So before any leveraged trade, the most useful question is not "how much can I make?" It is "at what price am I forced out, and how far is that from here?" If you can't answer that in one sentence, you don't know the trade yet.
Trading hours add a twist. Kalshi's stock perps are not open 24/7. They follow a set schedule with regular closures, and the stock can still move while the market is closed, so a position can reopen at a different price (Kalshi Help Center). Stops, alerts and position size need to assume you won't always be able to act, or be watching.
Lesson 3: Funding is a cost you pay by holding
Because perps never expire, the funding payment is how the contract stays tied to the real price. Depending on market conditions, you may pay or receive it on a regular schedule. On Kalshi's stock perps, funding is calculated once a day at 4:00 PM ET (Kalshi Help Center). For a short trade, it may matter little. For a position you "just leave on" for weeks, it can quietly add up.
Treat funding like rent. Know what it is before you move in.
Lesson 4: Size from the downside up
Most people size trades from the top down: "I want to make X, so I need Y leverage." Flip it.
- Decide the most you are willing to lose on this one idea. Many careful traders keep it to a small slice of their account.
- Decide where your idea is clearly wrong. That is your exit.
- Let the distance between entry and exit set your position size.
- Then check that your liquidation price sits well beyond your exit, not before it.
If the leverage you wanted puts liquidation inside your own stop, the leverage is too high. The plan decides the leverage. The leverage never decides the plan.
Lesson 5: New products have new edges
Whenever a new product launches, the early days can have rough edges: thinner trading, wider spreads, rules still being tested. This one even has a lawsuit attached on day one. None of that means stay away. It means read the contract specs, the margin rules, the trading hours and the funding schedule on whatever venue you use before you put money in. "Regulated" means there is oversight. It does not mean there is no risk.
A simple pre-trade checklist
Before any leveraged trade, stock perp or otherwise, I'd want a clear answer to each of these:
- What is my total exposure, in dollars, not in "x"?
- What is my liquidation price, and how far away is it in percent?
- Where am I wrong, and is that exit before liquidation?
- What does funding cost me per day if I hold?
- When is this market closed, and what could move the stock while it is?
- What events this week could move this name 5% or more?
- If this goes to zero, am I still okay?
That last one sounds dramatic. It is the one that keeps people in the game.
Why we care about this
We built Core, the TradeShield app that checks conditions before your trade goes through, because most painful trades I've seen weren't bad ideas. They were fine ideas with the wrong size or a missing exit. If checking before you click sounds useful, you can see how Core works at tradeshieldlabs.com. Brutus, our Chihuahua Chief Security Officer, has reviewed the checklist and approves of anything that involves fewer surprises.
The takeaway
Stock perps are a new wrapper on an old tool. The tool is leverage, and leverage has never cared how familiar the ticker is. Know your exposure, know your exit, know your liquidation price, and size from the downside up.
Trading involves risk. Nothing here is financial advice or a recommendation to buy or sell anything. It's a set of lessons, and the best ones are the ones you learn before the trade instead of after it.
John, Founder & CEO, TradeShield Labs
Top comments (1)
I would make the gap case visible in the pre-trade check too. Showing the planned stop price beside a worse executable price would make your warning about market closures concrete, without suggesting that placing a stop fixes the maximum loss.