How to charge perpetual contract funding

Funding rates ensure alignment between perpetual contract price and underlying asset's spot price, with positive rates indicating long positions paying short positions and vice versa.

Oct 22, 2024 at 08:30 am

How to Charge Perpetual Contract Funding

Step 1: Understand Funding Rates

• Funding rates are periodic payments made between traders with opposite positions in perpetual contracts.
• They ensure that the contract price remains aligned with the underlying asset's spot price.
• Positive funding rates indicate that long positions (buyers) are paying short positions (sellers).
• Negative funding rates indicate the opposite, with short positions receiving payments from long positions.

Step 2: Check Exchange Fees

• Different exchanges have varying funding rates and fees.
• OKX, Binance, and Huobi are popular exchanges for trading perpetual contracts.
• Check the exchange's fee schedule to determine the funding rates and any associated fees.

Step 3: Determine Funding Schedule

• Exchanges typically have specific funding schedules, usually every 8 hours.
• The funding schedule will indicate when funding payments are settled. This is important for planning your trading strategy.

Step 4: Fund Your Account

• Ensure that your exchange account has sufficient funds to cover potential funding payments.
• Note that funding payments are made in the contract's underlying currency, such as USDT or BTC.

Step 5: Open a Position

• Open a long or short position in the perpetual contract you wish to trade.
• The size of your position will determine the amount of funding you will receive or pay.

Step 6: Monitor Funding Payments

• After funding is settled, the funds will be credited or debited to your account.
• You can track your funding payments on the exchange's platform or in your trading account history.

Step 7: Manage Your Risk

• Funding rates can fluctuate rapidly, resulting in unexpected losses or profits.
• Manage your risk by closely monitoring funding rates and adjusting your trading strategy accordingly.

Tips:

• Consider the funding rate when making trading decisions.
• Use funding payments to your advantage by taking positions that align with the funding rate.
• Be aware of the potential for large funding payments when holding positions overnight.
• Regularly review the exchange's fee schedule and funding schedule to avoid any surprises.