The strategy involves simultaneously taking a Long position and a Short position on the same asset to neutralize price movements, while profiting from the difference in funding rates. The profit is calculated as follows:
Profit ≈ (Short Platform Rate) - (Long Platform Rate).
Strategy 1: Perp vs Perp
Short the contract where the rate is highest and long where it is lowest.
Platform A
SHORT
High rate received
Platform B
LONG
Low rate paid
Example: For Crypto A, the rate is +0.0591% on Platform A and -0.1089% on B.
• We Short on A (max rate).
• We Long on B (min rate).
• Profit ≈ (+0.0591%) - (-0.1089%) = +0.168% per period.
• For $1000 ($500 per side), the gain is $0.84 per period.
• Over a month (≈720 periods), the estimated gain is $604.
Strategy 2: Perp vs Spot
Short the contract where the rate is positive and buy the asset on the spot market (0% cost).
Platform A
SHORT
Positive rate received
Spot Market
BUY SPOT
0% funding cost
Example: For Crypto A, the rate is +0.1596% on Platform A.
• We Short on A (positive rate).
• We Buy Spot (0% cost).
• Profit ≈ (+0.1596%) - (0%) = +0.1596% per period.
• For $1000 ($500 per side), the gain is $0.80 per period.
• Over a month (≈720 periods), the estimated gain is $575.