Funding Rates Explained
What Are Funding Rates?
Funding rates are periodic payments between long and short traders on perpetual futures contracts. They exist to keep the contract price anchored to the spot price. When the contract trades above spot, longs pay shorts. When below, shorts pay longs.
How Funding Rates Work
- Rates are calculated every 8 hours (00:00, 08:00, 16:00 UTC)
- You only pay/receive if you hold a position at the snapshot time
- Rate = (Premium Index / 8) × 0.05% typical max
- Positive rate → longs pay shorts; Negative → shorts pay longs
Funding Cost Calculation
Funding Fee = Position Value × Funding Rate × Number of Periods Held
Example: $50,000 long position at 0.01% rate for 3 periods = $15 in funding fees.
Funding Rate Strategies
- Avoid holding through snapshots → Close before funding if rate is against you
- Farm positive funding → Hold positions that earn funding
- Cross-exchange arbitrage → Different rates on different exchanges
Calculate your position cost including funding:
Open Calculator →