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Case on working with a negative funding rate

Case on working with a negative funding rate
11/04/2024

We have prepared each lesson in text and video format.

In this lesson we will look at how to arbitrage a negative minus (negative) funding rate.

We will consider the case using the ID coin as an example, the funding rate is -0.4416%.

Case on working with a negative funding rate

Let us remind you that financing rates come with “+” and “-” signs.

If the funding rate is positive at settlement, then long position holders pay short position holders. If the rate is negative, then holders of short positions pay holders of long positions.

A negative funding rate occurs when the futures price is lower than the spot price. And from this follows one of the strategies.

Case on working with a negative funding rate

Let’s say you hold a coin for a long time and notice that the spot price has become lower, then the following strategy is possible:

  1. Sell on the spot;
  2. Buy long futures with 1x leverage;
  3. You get a financing rate of 0.44%.

    Total: sold/bought at a profit + financing rate several times a day.

This works best when the value of the token drops.

Case on working with a negative funding rate

Another strategy is that we go long on one exchange and short on another.

Case on working with a negative funding rate

On Binance we go long and get a rate of 0.44%, and on buybit we go short and pay 0.28%. And the net profit will be 0.16%.

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Case on working with a negative funding rate

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