Case of arbitrage with 5x leverage on a negative funding rate

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In this case, we will demonstrate funding rate arbitrage using the example of the API3 token.

On Bybit, the negative funding rate is -3%.

Meanwhile, on Phemex, the negative funding rate is -1.8%.

We opened a long position on Bybit and a short position on Phemex, as short traders pay funding to long traders. This way, we receive 3% and lose 1.8%, resulting in a spread of +1.2%.

We took a somewhat risky approach by entering the trade with 5x leverage. With this leverage, the funding rate also increases fivefold, meaning our profit is +6%.