Funding Rate Arbitrage 101: Spot-Perp Carry, Costs and Risks

Direct answer: Funding-rate arbitrage (cash-and-carry) commonly pairs a spot long with a roughly equal perpetual short to reduce directional exposure and attempt to capture positive funding carry. Market-neutral is not the same as low risk, and the carry is neither stable nor guaranteed positive.

Check the exact contract rules first\nFunding direction, cadence, formula, caps and settlement timing vary by venue and contract. Do not treat an eight-hour cadence as a universal permanent rule. When using the Funding Rates tool, verify the source contract specification as well.

How the hedge works\nBuying spot and shorting a similar perp notional can reduce price direction exposure, but spot price, mark price, basis, fill timing and size do not match perfectly. Net exposure is not automatically zero.

Annualization is only a scenario\nThe Funding Arbitrage tool annualizes the rate you enter using its stated convention. It is not a forecast: funding can flip quickly and the source contract cadence must be verified.

Risks that belong in the model\n1. Funding reversal. 2. Leg mismatch from fills, latency, halts or networks. 3. Margin/liquidation on the perp leg. 4. Basis, spread and liquidity. 5. Venue, custody, bridge and stablecoin risk. 6. Current account fees and real transfer costs. Include referral benefits only after official account verification.

Use the structure as a continuously managed carry trade with a risk budget, not as a fixed-interest product.

Educational content only; not financial advice or a return promise.