Funding Rate

Funding rates are periodic payments between long and short traders that keep perpetual prices aligned with the underlying ETF.

How Funding Works

Unlike traditional futures with expiry dates, perpetuals use funding to maintain price alignment.

The Mechanism

1. Funding interval — Payments occur at regular intervals (typically every 8 hours)

2. Rate calculation — Based on deviation between perp price and oracle price

3. Payment direction — Higher side pays lower side

If Perp Price > Oracle Price:
    Longs pay Shorts

If Perp Price < Oracle Price:
    Shorts pay Longs

Funding Rate Calculation

The funding rate is calculated based on the premium/discount of the perpetual price vs the oracle:

Premium = (Mark Price - Oracle Price) / Oracle Price
Funding Rate = Premium × Funding Interval Factor

Example

Mark Price:   $227.25
Oracle Price: $225.00
Premium:      +1.0%

Funding Rate: +0.033% per 8 hours (example)

Longs pay 0.033% of position value to shorts.

Payment Calculation

Your funding payment/receipt:

Funding Payment = Position Value × Funding Rate

Example:

Position: Long 10 SOXX @ $225 = $2,250
Funding Rate: +0.033%

Payment: $2,250 × 0.00033 = $0.74

You pay $0.74 to short holders

Funding Schedule

Interval	Payment Times (UTC)
8-hour	00:00, 08:00, 16:00

You must hold a position at the funding timestamp to pay/receive funding.

Checking Current Funding

The trading interface displays:

• Current rate — Rate for next payment

• Countdown — Time until next funding

• Predicted rate — Estimated next rate based on current premium

Funding Strategy Implications

For Long Holders

Scenario	Funding	Action
Positive rate	You pay	Consider cost in thesis
Negative rate	You receive	Adds to returns
High positive	Expensive to hold	May want to reduce or exit

For Short Holders

Scenario	Funding	Action
Positive rate	You receive	Adds to returns
Negative rate	You pay	Consider cost in thesis
High negative	Expensive to hold	May want to reduce or exit

Funding Arbitrage

Some traders specifically target funding:

1. Long ETF in TradFi

2. Short SOXX perp on Rubicon

3. Collect positive funding (if perp trades at premium)

4. Delta-neutral position earns funding

This arbitrage activity is what keeps perp prices aligned with the underlying.

Typical Funding Ranges

Market Condition	Typical Funding (8h)
Neutral	-0.01% to +0.01%
Bullish sentiment	+0.01% to +0.05%
Very bullish	+0.05% to +0.1%+
Bearish sentiment	-0.01% to -0.05%
Very bearish	-0.05% to -0.1%+

Funding and Market Hours

During ETF market closure:

• Oracle price is frozen

• Mark price may still deviate based on trading activity

• Funding continues to accrue

• Premium/discount reflects overnight sentiment

Tips

1. Check funding before entering — High funding can erode profits

2. Factor into holding costs — Daily/weekly funding adds up

3. Watch sentiment shifts — Funding rate indicates market bias

4. Time entries — Entering just after funding avoids immediate payment

5. Consider for swing trades — Multi-day positions accumulate funding