What is funding rate arbitrage?

Funding rate arbitrage is to hedge one investment in the Futures market by trading in Spot one. For instance, if you have a short position in the Futures market, you can buy in the Spot market with the same value to protect your investment from large price volatility and earn funding fees. 2. Why use Funding Fee Arbitrage?

How do I Choose an arbitrage portfolio?

Step 1: Choose an arbitrage portfolio with the highest annual yield. The funding fee is settled 3 times each day, and profit = position value * funding rate. Under the same position value, the higher the funding rate, the greater the arbitrage. Learn more about the funding rates of different contracts.

What is arbitrage & how does it work?

Arbitrage describes the act of buying a security in one market and simultaneously selling it in another market at a higher price, thereby enabling investors to profit from the temporary difference in cost per share. The arbitrage strategy can be used in many markets including those for trading stocks and those for currency trading .

How does funding rate work?

If an exchange needs to push perp price up to close the gap, the funding rate will be lowered to incentivize buying (or short closing). In contrast, if the perp price needs to be adjusted downwards, the funding rate will increase to incentivize selling (or long closing).