FuturesHUB / Funding payment
Perpetual futures
Funding payment
The payment is the cashflow. Take the notional the venue uses, multiply by the realized rate, and repeat for every timestamp the position lives through.
The arithmetic
Payment equals position notional times the funding rate, for that interval. A long notional of $50,000 and a realized rate of 0.01% pays $5 if the rate is positive and the specification says longs pay. Over three eight-hour intervals at the same rate, the bill is $15. Rates rarely stay identical, so multiply interval by interval and add.
Watch the unit. A ticket that shows 0.0100% is five dollars on $50,000. A ticket that shows 0.0001 as a decimal is the same rate. A ticket that shows 0.01 and means 0.01% is also the same rate. Misreading the unit by a factor of one hundred is the common error.
Which notional
Venues specify whether the notional is marked at the index, the mark, or a price inside the funding formula. The difference matters when the perpetual is far from spot. Use the formula on the contract page for a number you will reconcile to the fill report. Use notional times rate as the estimate before the timestamp.
On an inverse contract the payment is in coin. Convert it to dollars only when you are comparing it with a dollar risk limit, and write the conversion price you used.
A worked holding period
Suppose you hold a linear long for a week on an eight-hour contract. That is 21 intervals. If the average realized rate is 0.005%, the week's funding is 21 times 0.005% times notional, or 0.105% of notional. On $20,000 that is $21. A quiet week. If the average is 0.05%, the same week is $210, which can exceed the trading fee.
The tools workbook will compute notional times the rate you type times intervals per day times days. It will not fetch the average for you. Type the rate you actually observed, or a rate you are stress-testing, and label it as such.
On the ticket
- Copy the realized rate after the timestamp, including the percent sign convention.
- Multiply by notional. Write the margin asset next to the result.
- Add one row per interval you held. Sum the rows for the holding period.
- Reconcile the sum to the funding line on the venue's fill or cashflow report. Adjust the notional definition if they differ.
Questions
Is the payment taken from margin?
Yes. The cashflow hits the margin balance. A string of payments against you can move the position toward liquidation even if the mark has not moved.
Where do I get the rate to type into the tools page?
From the venue ticket or its funding history. The tools page does not request a live funding feed, and an empty rate stays blank.