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.