Learn / Funding rates on perpetual futures
Derivatives
Funding rates on perpetual futures
Funding is a periodic payment between the longs and the shorts on a perpetual contract. It is not a fee paid to the exchange, though some venues take a slice. It is how the contract stays near the spot index without an expiry date.
The sign
A positive funding rate usually means longs pay shorts. A negative rate usually means shorts pay longs. The interval is often eight hours, sometimes one hour or four. The venue’s contract spec is the authority for both the sign convention and the clock.
The payment is roughly position notional times the funding rate. A 0.01% rate on a $20,000 position is $2 per interval. Three intervals a day is $6 a day if the rate stays there. A crowded trade with a 0.10% rate is $20 per interval, $60 a day, on that same notional.
Where traders get surprised
The rate you see on a screenshot is the last rate or the predicted rate. It changes. Holding a leveraged long through a weekend of positive funding can cost more than the price gained.
Funding is calculated on notional, so leverage does not reduce it. Ten times leverage on a $2,000 margin is still a $20,000 position. The funding bill follows the $20,000.
Questions
Does LiquidityFlow show a live funding rate?
Not on the coin page. Funding is specific to a contract on a venue. Read it on that venue’s contract panel. Our practice desk does not invent a funding charge.
Is funding the same as a trading fee?
No. The trading fee is paid to the venue when you trade. Funding is paid to the other side of the market on a schedule.