Funding rate arbitrage
Funding rate arbitrage holds equal and opposite positions on two markets with different funding rates. Price moves cancel out, and the funding diff is what the position earns or pays.
Cross-exchange arbitrage
Highest net funding 8h
View all| Coin | Long leg | Short leg | Net funding 8h | Last 7 days, cumulative | Open spread |
|---|---|---|---|---|---|
Data as of
The two legs
Short the perpetual with the higher funding rate. Go long the perpetual with the lower rate, or long spot. Both legs are equal in size. What is the funding rate explains how the funding fee is paid.
Entry, holding and exit
Entry: enter when the funding diff has held across several periods and the open spread does not eat the expected funding income.
Holding: each venue settles funding on its own schedule. Count what both legs receive and pay.
Exit: close when the funding diff narrows or reverses. A favorable close spread is also a reason to close early.
How much can funding rate arbitrage earn?
There is no fixed figure. Over the life of the position, the result is the funding diff between the two legs summed over every period, minus the spread, fees and slippage paid at open and close. A spot leg neither pays nor receives funding. Three things decide it: how wide the funding diff is and how many periods it lasts, how much spread and fees you pay to open and close, and how large a position you can hold, which depth, margin and liquidation distance limit. An annualized figure only scales the current diff to a year. Rates change every period, and what you earn or pay is what settles each period.
The current funding diff for each coin and its settled total over the last 7 days are on the Cross-exchange arbitrage tab of the Funding rates page in Z Market Lab.
Related reading: how hedged arbitrage earns and how often funding settles and how to annualize it.
Key metrics
| Key metrics | |
|---|---|
| Funding rate | Compare both legs normalized to one period, alongside each venue’s settlement period and rate cap. |
| Cumulative funding diff | The funding diff summed over several days shows whether it holds or was a single spike. |
| Open spread | Measured at executable prices: the ask on the long leg and the bid on the short leg. |
| Close spread | The spread you can close at: the bid on the long leg and the ask on the short leg. |
| Depth and volume | Order book depth, volume and open interest set how much size each leg can take. |
| Liquidation distance | How far price can move before a perpetual leg reaches liquidation. |
What are the risks of funding rate arbitrage?
Funding reversal: Funding rates change every period. When the funding diff narrows or flips, the position pays funding instead of receiving it.
Liquidation: Each perpetual leg holds its own margin. A sharp move can liquidate the losing leg while the gain sits on another venue and cannot cover it.
Leg gap: If one leg fills and the other does not, the position carries directional exposure until the leg gap closes.
Slippage: On a thin book, market orders fill through several levels and the filled spread comes in below the quoted one.
Venue risk: Funds sit on two venues. Either one can halt withdrawals, suffer an API outage, delist a market or fail.
See what are the risks of arbitrage for a fuller account.
Data in Z Market Lab
The funding rates page lists a long leg and a short leg for each coin by funding diff normalized to one period, with the cumulative funding diff over several days, the time to the next settlement and funding history.
The funding rates page is for viewing only. To get an alert when your conditions are met, save them as an opportunity tab in the market monitor; alerts and notifications explains how.
Execution in ZML Trade
Trade opens and closes both legs as one combo, perpetual against perpetual or spot against perpetual. At each settlement, funding is booked to PnL from the combo’s combo position, average cost and that period’s rate, so it can differ slightly from what the exchange actually charged or paid. With the Funding fee paid alert set, Trade notifies you when net funding, normalized to 8 hours, is a cost of at least your value.
Parameters covers each combo setting. Risk controls covers liquidation distance and the leg gap.