Strategy · Arbitrage

PERPETUAL FUNDING RATE ARBITRAGE

NeutralDefined riskAdvanced

Overview

Capture funding payments by going short a perpetual when funding is persistently positive and long an offsetting spot position. The spot position neutralizes price risk; you pocket funding.

Setup

1.Screen perp funding rates across exchanges; find sustained funding >0.05% per 8h.
2.Buy spot of equal notional on a venue with low fees.
3.Open a perp short on the high-funding exchange.
4.Collect funding payments every 8 hours.
5.Monitor funding daily — exit when it normalizes or flips negative.
6.Account for spot withdrawal fees if collateral must be moved.

Max profit

Cumulative funding payments minus fees; can exceed 30% APR in heated markets.

Max loss

Liquidation risk on the short perp if not properly margined; exchange insolvency.

Breakeven

Funding collected covers fees and slippage on both legs.

When to use

During euphoria phases (top of bull cycles) when retail loads up on perp longs and funding spikes.

When to avoid

When funding is below 0.01% per 8h — return doesn't justify operational complexity.