Funding-rate arbitrage
Two venues pay different funding on the same perp. Long where it is low, short where it pays, collect the gap every settlement.
What funding is
A perpetual future has no expiry, so exchanges use a funding rate to keep its price tied to the underlying. At every settlement — typically each 1, 4 or 8 hours — one side of the market pays the other. Positive funding: longs pay shorts. Negative funding: shorts pay longs. The rate is set per venue, from that venue’s own premium and interest model.
Why venues diverge
Each exchange computes funding from its own order flow. A coin heavily shorted on one venue and heavily longed on another will show two different rates for the same asset — sometimes with opposite signs. Divergence is largest on mid- and small-cap perps, where a single large position can tilt one venue’s premium.
The trade
Hold the same size long on the venue where funding is low (or negative) and short on the venue where funding is high. Price exposure cancels: the asset can move anywhere and the two legs offset. What remains is the funding differential, collected at each settlement.
A real captured row: ZIL quoted -0.105% per 4h on KuCoin and +0.320% per 8h on Phemex.
- Normalize KuCoin to 8h: -0.105% × 2 = -0.210% /8h. Negative rate — shorts pay longs, so a long position on KuCoin receives 0.210% per 8h.
- Phemex is already 8h: +0.320%. Positive rate — longs pay shorts, so a short position on Phemex receives 0.320% per 8h.
- Spread: 0.320 - (-0.210) = 0.530% per 8h across both legs.
At $10,000 per leg that is $53 per 8h window — about $159 a day, before fees, slippage and basis. The matrix computes exactly this number for every asset and ranks by it.
What actually decides profitability
The collected spread is the gross side. Against it:
- Entry basis — the price gap between the legs at entry. Adverse basis is a cost paid up front. See Basis arbitrage.
- Fees and slippage — four taker fills round trip. See Fees & slippage.
- Funding flips — the rate is recomputed every interval and can change sign after you enter. This is the main way these trades die. See Funding flips.