Funding Rate Arbitrage Strategies
Explore delta-neutral and other funding rate arbitrage strategies for optimal trading.
Common Funding Rate Arbitrage Strategies
1. Delta-Neutral Funding Arbitrage
Go long spot and short perpetual to collect positive funding. Hedging your price exposure while earning from over-leveraged traders.
2. Reverse Funding Arbitrage
When funding is negative, take a short spot and long perpetual position to earn funding from bearish traders.
3. Cross-Exchange Arbitrage
Capture funding differences between exchanges by longing where funding is low and shorting where it’s high.
4. Multi-Asset Funding Rotation
Rotate capital into assets with the highest funding rates (BTC, ETH, altcoins) while staying market-neutral.
Key Risks to Consider
- Borrowing Costs: Spot longs may require margin or stablecoin borrowing, reducing net yield.
- Execution & Slippage: Quick entry and exit is essential; poor liquidity can eat profits.
- Exchange Risk: Holding capital on centralized exchanges exposes you to counterparty and security risk.
- Volatility & Liquidation: Imperfect hedging or sudden spikes can lead to unexpected losses.