Glossary · F
Funding Rate
A periodic payment between long and short positions in a perpetual swap contract that keeps the perp price aligned with the underlying spot price. When longs outnumber shorts, longs pay shorts (positive funding). When shorts dominate, shorts pay longs (negative funding).
Last updated
How Funding Rate works in practice
The funding rate is a periodic payment between long and short holders of a perpetual future, and it is what keeps the perp trading close to spot. When perps trade above spot, longs pay shorts; when below, shorts pay longs.
Worked example
A funding rate of 0.01% per eight hours means longs pay shorts 0.01% of position value three times a day — about 11% annualised. On a 10,000 long that is roughly 3 per day, paid regardless of whether the price moves.
Figures are illustrative and chosen to be checkable, not live market data.
The mistake that costs people money
Funding is charged on position size, not on your margin. A 10× leveraged position pays funding on the full notional, so a modest-looking rate can consume a large share of the collateral behind it.
Learn more
Funding Rate: common questions
- What is Funding Rate?
- A periodic payment between long and short positions in a perpetual swap contract that keeps the perp price aligned with the underlying spot price. When longs outnumber shorts, longs pay shorts (positive funding). When shorts dominate, shorts pay longs (negative funding).
- How does Funding Rate work in practice?
- The funding rate is a periodic payment between long and short holders of a perpetual future, and it is what keeps the perp trading close to spot. When perps trade above spot, longs pay shorts; when below, shorts pay longs.
- Can you give an example of Funding Rate?
- A funding rate of 0.01% per eight hours means longs pay shorts 0.01% of position value three times a day — about 11% annualised. On a 10,000 long that is roughly 3 per day, paid regardless of whether the price moves.
- What do people get wrong about Funding Rate?
- Funding is charged on position size, not on your margin. A 10× leveraged position pays funding on the full notional, so a modest-looking rate can consume a large share of the collateral behind it.
- Where can I learn more about Funding Rate?
- Our full guide, What Are Perps?, covers Funding Rate in depth with worked scenarios and the risks involved. This glossary entry is the short definition.