Funding arbitrage: how to earn on rate differences
Funding arbitrage is a strategy where you open a long on one exchange and a short on another for the same asset at the same time and collect the difference between their funding rates. The asset’s price, ideally, does not affect the result.
The idea
If the funding rate for a coin is higher on exchange A than on exchange B, the short on A receives more than the long on B pays. You hold two positions of equal size: a price rise or fall produces a profit on one leg and a loss on the other, and the rate difference stays with you. Such a position is called delta-neutral. For what the rate itself is and how to compare it, see the guide to the funding rate.
A worked example with illustrative numbers
These are illustrative numbers, not real quotes. The rate for a coin: +0.05% per 8 hours on exchange A, +0.01% per 8 hours on exchange B. Each leg is 10,000 USDT.
- the short on A receives 0.05% × 10,000 = 5 USDT per period;
- the long on B pays 0.01% × 10,000 = 1 USDT per period;
- total +4 USDT per 8 hours, or 12 USDT per day — 0.12% of the leg size.
Now the costs. Suppose the taker fee is 0.05% on both exchanges. Opening two legs and closing two legs is four trades: 4 × 0.05% = 0.20% of the leg size, which is 20 USDT. At 12 USDT per day they pay back in about 1.7 days — if the rates do not change. Maker orders and lower fees shorten this period, while the price spread at entry and exit can lengthen it.
What the result consists of
| Component | Sign | What matters |
|---|---|---|
| Funding rate difference | + | You need a rate that holds, not a one-off spike; both exchanges’ rates are brought to the same interval |
| Entry and exit fees | − | Four trades; taker or maker |
| Price spread at entry | ± | Buy price on one exchange against sell price on the other, from the order book for your size |
| Price spread at exit | ± | It can differ from the entry one; see the cross-exchange spread |
| Slippage | − | Depends on order-book depth |
Variations
- Futures against futures. The most common scheme: two exchanges, different rates for one coin.
- Spot against futures. The coin is bought on spot and hedged with a short on the perpetual; while funding is positive, the short receives the payment. Margin is needed only for the short, but you also need capital to buy the coin.
- CEX against perp DEX. Perp DEXes often show different rates and different intervals (in particular hourly ones). For the differences see CEX and perp DEX arbitrage.
What to check when choosing a pair
- The rate history. Whether the difference holds at the needed level long enough to pay back the fees.
- The real spread from the order book. A ticker price is not the price you will be filled at for your size.
- Payment intervals. The legs can have different intervals: payments then arrive at different times, and over the same period the legs have a different number of payments.
- Liquidity and limits. Whether there is depth and whether the position size you need is allowed.
- Position risks. Liquidation of one leg on a sharp price move, different leverage and margin on two venues — see the risk checklist.
How SpreadScope helps
The scanner collects pairs between futures (and spot) of different exchanges and shows for each one the funding spread, accumulated funding over periods, the real spread from the order book, fees and limits. Filters let you keep only what suits you in profitability and liquidity, and Telegram signals arrive when a pair enters your filter.