Funding rate arbitrage: a practical guide

Funding rate arbitrage is a delta-neutral trade: you hold a long and a short of the same coin, at the same size, where funding differs (most often perps on two venues, sometimes spot against a perp). Price moves roughly cancel out, and you keep the funding difference minus trading fees for as long as the spread stays positive and both legs stay open.

What is funding rate arbitrage?

A perpetual future, or perp, has no expiry date. To keep its price close to the spot index, the venue makes longs and shorts pay each other at regular intervals. When the funding rate is positive, longs pay shorts; when it is negative, shorts pay longs. The money moves between traders: Binance, for one, says it charges no fee on funding payments. For the mechanics, see what a funding rate is and how venues calculate it.

Every venue sets its own rate, so the same coin can pay 3% a year on one venue and 18% on another at the same moment. The reasons are structural:

• Different traders. One venue is crowded with leveraged longs, another with hedgers who sit short.
• Different books and prices. Each venue measures the premium from its own order book against its own index or oracle.
• Different intervals. Most DEXs settle every hour. CEXs usually settle every 4 or 8 hours, and Binance and Bybit move a market to shorter intervals when funding runs hot.
• Different caps. Hyperliquid caps funding at 4% per hour, while Binance caps BTC and ETH far tighter than small coins. A loose cap lets a rate run much further.

Funding rate arbitrage, also called funding farming, collects the gap between two such rates.

What are the two ways to run it?

Spot plus a short perp (cash-and-carry)

You buy the coin on spot and short the same amount as a perp, often on one exchange. When funding is positive, the short collects it while the spot holding offsets the price risk. It needs one account but works in one direction: earning negative funding would mean borrowing the coin to sell it, at a borrow rate. The spot leg is paid in full, so it ties up more capital. Our screener does not rank this variant.

Perp against perp on two venues

You go long on the venue where funding is lower and short on the venue where it is higher. The sign does not matter. If one venue pays −20% APR and another +5%, a long on the first is paid by its shorts and a short on the second is paid by its longs: the spread is 5% − (−20%) = 25%. Both legs are on margin, so leverage reduces the capital you post. This is what the funding rate screener ranks, and what the rest of this guide covers.

What about Binance?

On a single exchange such as Binance, funding rate arbitrage usually means the spot-plus-perp version. Across venues, a Binance perp is one possible leg. Keep three details in mind: Binance sets the interval per market (most perps settle every 4 hours, BTC and ETH every 8), and a market switches to hourly after a settlement at the cap; you pay or receive funding only if your position is open at the funding time; and a Binance account requires identity verification (KYC).

Where does the profit come from, and where does it leak?

The income is the spread between the two annualized rates:

spread = APR(short venue) − APR(long venue)

APR on this site is simple, not compounded: the hourly rate times 8,760 hours. On hourly venues the spread accrues hour by hour; on 4- and 8-hour venues it arrives in lumps.

Four things eat into it:

• Taker fees on four fills: open and close, on both legs. In bps of one leg's notional, fee_rt = 2 × (taker_long + taker_short).
• The price gap between the legs. The two legs rarely fill at exactly the same price, and the change in that gap from entry to exit is real profit or loss.
• Slippage on thin order books, which grows with your size.
• Transfers: deposits, withdrawals, bridges, and idle time in transit.

The screener's net APR already has the fees taken out; the other three depend on how you trade.

Funding rate arbitrage example: fees, capital and breakeven

The numbers below are hypothetical: an illustration, not a forecast.

Fees are a one-off cost of entry and exit, so the longer a steady spread lasts, the less they weigh: here they take about a tenth of the funding. Leverage changes only the capital line: at 3x the same pair needs about $3,333 and shows about 20% on capital, but each leg sits closer to liquidation.

What if the spread fades or flips?

The table assumes the spread holds for 21 days. It rarely does:

• It fades: 15% for the first 7 days, then 5% for 14 days. Funding ≈ $23.97, net ≈ $19.47, or about 6.8% APR.
• It flips: 15% for 14 days, then −10% for the last 7, when the pair pays. Funding ≈ $19.18, net ≈ $14.68, or about 5.1% APR.

Execution has a price too. Entering the two legs 5 bps apart against you costs $2.50 on this size if the prices meet again at exit: more than half of all the fees.

How do you do it, step by step?

1. Pick a pair on its 7-day spread, not on "now". The current rate is one snapshot. A pair whose last 24 hours run more than 3× the average of the six days before (or above 15% APR when that average is below 5%) is flagged as a spike, and spikes usually fade.
2. Check that both venues accept you: country restrictions, KYC on centralized exchanges, invite codes on a few DEXs.
3. Fund both venues and leave a margin buffer. Margin is not shared between venues, and moving money can take from minutes to an hour or more.
4. Open both legs at the same size, as close in time as you can. Confirm the ticker is the same asset on both venues and the contract sizes match.
5. Watch the funding sign, the margin on each venue and the price gap between the legs.
6. Close both legs together once the spread no longer covers your costs or turns negative.
7. Check the result against the equity of both accounts, not against a model.

The last step matters more than it looks: venues book fees and funding differently, and our own pair-trading models once overstated real profit by about 1.8×. Equity on both venues, before and after, is what counts.

Is funding rate arbitrage profitable?

Sometimes, after fees, for as long as the spread lasts. Any fixed return figure is a guess, but a few patterns help set expectations:

• Majors cluster near one baseline. Binance, Hyperliquid and other venues build an interest term of 0.01% per 8 hours into the rate, which is 10.95% APR (simple; Hyperliquid's docs quote 11.6% because they compound it). In calm markets many venues sit close to it: in one July 2026 snapshot, BTC's 7-day funding was between 10.1% and 11.2% APR on seven of the ten DEXs that listed it. Spreads on majors are often thin, and fees decide.
• Wide spreads sit on smaller coins. They have less open interest, thinner books and more spikes, so they are harder to enter at size and quicker to fade.
• The hold period matters. In the example, fees are earned back in about 2 days: close on day 3 and you keep under $2; hold a steady spread for three weeks and they become a small cost.
• Costs add up. In our own trading, fees took roughly a quarter of what funding paid.

Funding rates change all the time, and past spreads do not predict future ones. Nothing here is investment advice.

What are the main risks?

A delta-neutral pair removes direction risk, not the others:

• One leg is liquidated. Margin is not shared, so at 3x a move of roughly 25–30% against one leg can close it while the other leg's profit sits on another venue.
• Funding flips. Spikes fade and signs change; the example's flip is mild.
• Legging and slippage. The two orders do not fill at once, and a fast move between them can cost more than days of funding.
• Venue failure and auto-deleveraging (ADL). Outages, exploits and paused withdrawals happen. In a crash, ADL can close your profitable leg and leave the other one unhedged.
• Same ticker, different asset. One ticker once traded at $11.65 on one venue and $0.106 on another. Equal coin counts there would not be a hedge.
• Access rules. Many venues bar some countries. Use only venues you are allowed to use.

The guide to funding arbitrage risks works through each of them with numbers and ends with a checklist to run before you open a pair.

Which tools on this site help?

The screener shows the pair with the widest 7-day spread for each coin (turn on “All pairs” to see every profitable combination), ranked by net APR at your hold period with a discount for unsteady spreads and thin markets. Rows also show the now, 24h, 7d and 30d spreads, return on capital at your leverage, breakeven days and stability. Each coin's page, such as BTC funding across venues, shows every venue's rate and every pair. The calculator reruns the example above with your own inputs, and the methodology lists every formula and threshold.