Funding Rates on Perpetual Futures: A Worked Example of What You Pay
Funding rates on perpetual futures are easy to ignore until you hold a position for a few days. They are a real cost or income, and the maths behind them is simple enough to do by hand.
A Short Recap
A perpetual futures contract has no expiry date. To keep its price close to the underlying market, exchanges use funding payments exchanged between traders who are long and traders who are short. The exchange does not keep these payments as a fee. Bitval offers futures markets, with trading fees of 0.03% for makers and 0.06% for takers, which are separate from funding.
Who Pays Whom
When the funding rate is positive, longs usually pay shorts. When it is negative, shorts usually pay longs. A positive rate tends to appear when the contract trades above the underlying price, and a negative rate when it trades below. The exact formula and the payment interval are set by each exchange.
The Basic Formula
The payment on a position is its size multiplied by the funding rate:
Funding payment = position value x funding rate
Position value is the full size of the position, not just your margin. That is why leverage makes funding more noticeable.
A Worked Example
Suppose you hold a long position worth 10,000, and the funding rate for the current interval is 0.01%.
- Payment per interval: 10,000 x 0.01% = 1.00
- If funding is paid three times a day, that is 3.00 per day
- Held for ten days at the same rate, that is 30.00
Because the rate is positive, you would pay this as a long. A short of the same size would receive it. The figure is small here, but it grows with position size and with the rate.
Why the Rate Changes
The funding rate is not fixed. It moves with market conditions, so a rate that was small last week can be higher this week. When the market is strongly one-sided, rates can rise noticeably. Checking the current rate before opening a position, and again while holding it, avoids surprises.
How Funding Fits Into Total Cost
For a short trade, funding is a small line item. For a position held for weeks, it can rival the trading fees. A fair cost estimate includes trading fees, the spread, and the funding you expect to pay or receive over the time you plan to hold.
Practical Habits
- Check the funding rate and the next payment time before you open a position.
- Remember that payments depend on the position value, not your margin.
- Treat a received payment as a possible bonus, not a reason to take a position.
- Include funding in any estimate of what holding costs.
You can create a Bitval account and review the futures markets Bitval offers before you trade.
This article is for informational purposes only and does not constitute financial advice. Futures and leveraged trading carry a high risk of loss, and funding rates can change at any time. The figures above are illustrations, not current rates.
