Glossary · Funding and perpetuals
Funding spread
A cross-venue funding spread is the difference between funding rates for the same underlying asset on two venues, measured over the same time period. With comparable contracts and matched exposure, a trader can receive the higher rate on a short perpetual position and pay the lower rate on a long position.
For example, 25% annualised funding on one venue minus 5% on another is a spread of 20 percentage points per year. This extrapolates current rates without compounding; it is not a promised annual return or a return on the collateral deposited.
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Funding spread versus price spread
Funding is a periodic payment between long and short holders. A positive rate normally means longs pay shorts; a negative rate reverses that direction. Keep the signs when subtracting rates: a short at −5% and a long at −15% have a positive 10-percentage-point annualised funding difference.
The basis is a difference in prices, not funding payments. A change in the price gap between your two contracts can create a gain or loss when you close. The bid–ask spread is another distinct cost of execution.
Compare the same funding interval
Convert both rates to the same period before comparing them. For a simple annualised rate, multiply the interval rate by the number of intervals per day and by 365. A hypothetical 0.01% every eight hours equals 0.03% per day, or 10.95% annualised. A rate of 0.002% every hour equals 0.048% per day, or 17.52% annualised. Their annualised difference is 6.57 percentage points.
These calculations assume unchanged rates. Check each contract’s actual interval, settlement currency and payment rules, and distinguish an estimated next rate from a settled historical rate. Contract types and changing notionals can make cash payments differ from this simple comparison.
Worked example: seven days of funding carry
Hypothetical calculation, not a historical trade or backtest. Assume linear perpetuals on the same asset, a constant $10,000 notional on each leg, positive rates of 25% APR on the short venue and 5% APR on the long venue, and eligibility for every funding payment over seven days. Amounts below use unrounded calculations.
Funding received: $10,000 × 25% × 7 ÷ 365 = $47.95.
Funding paid: $10,000 × 5% × 7 ÷ 365 = $9.59.
Gross funding difference: $38.36.
Assume fees of 2 basis points per fill for four fills: opening and closing both legs. That costs $8. Add $12 in total bid–ask and slippage costs, measured separately from the fees, for a $20 round-trip cost. If the inter-venue basis is unchanged, the result after those costs is $18.36.
Now suppose the relative price movement of the two legs produces a $15 loss at exit, measured separately from execution costs. The result becomes $3.36. If the funding spread instead halves to 10 percentage points immediately after entry and stays there, seven days earns only $19.18 before costs: −$15.82 after the same $20 costs and $15 basis loss.
This simplified example excludes borrowing, transfers, collateral conversion and taxes. Actual rates, position values and execution prices vary. Equal notionals do not eliminate liquidation, venue or hedge-execution risk.
How long does it take to cover costs?
At the initial 20-percentage-point spread, the assumed $10,000 position earns about $5.48 per day before costs. Covering $20 takes 3.65 days if the rates and notionals remain unchanged and there is no basis loss. At half that spread, it takes 7.30 days. This estimate is a cost hurdle, not a prediction that funding will persist.
Check the rate history, settlement times, available liquidity and margin on each venue before treating a wide spread as an opportunity. Gains on one venue do not automatically cover losses or margin requirements on another.
Try your own assumptions in the funding calculator · Compare current rates in the screener
For execution and collateral risks, read What goes wrong in cross-venue funding carry.
Source and assumptions
For one venue’s payment mechanics, see Bybit’s funding-fee documentation. Other venues and contracts can use different rules. All dollar amounts and rates in the worked example are illustrative assumptions, not current quotes or realised results.