A funding spread looks like free money until you subtract execution cost. Two things eat into it: the taker fee you pay to open and close each leg, and the slippage — the gap between the price you expected and the average price you actually filled at. Get either wrong and a "profitable" spread quietly becomes a loss.
Round-trip means four fills, not two
A delta-neutral funding trade has two legs (long on one venue, short on another). To open AND close it you cross the spread four times. ORBIT models cost as taker fee × 2 per leg plus slippage × 2 per leg — the full round-trip — because that is the cost you actually carry, not the headline one-way fee.
How ORBIT measures slippage — live L2 order books
For every venue with a real Level-2 order book, ORBIT ingests the live book and "walks" it at your chosen position size: it fills your order level by level and computes the volume-weighted average price versus the mid. That is the honest, size-dependent price impact — a $10k order on deep BTC books is near-zero, while the same order on a thin altcoin can cost real basis points.
- Slippage is computed from the mid price, so even an order that fits in the top level still pays the half-spread — exactly as it would in practice.
- Resting orders far from the touch (absurd prices on thin books) are ignored so a single junk level can’t inflate the estimate.
- If the book is too thin to fill your size, ORBIT marks the leg “slippage not modeled” instead of showing a misleading number.
RFQ and AMM venues: deep liquidity, no classical book
Some top venues (RFQ desks like Variational, AMM-style pools) don’t expose a classical order book — they quote an impact price per size instead. For these, ORBIT uses the venue’s tight top-of-book quote as the realistic cost for normal sizes rather than extrapolating a large-size quote onto a small order (which over-states slippage). The result is a realistic estimate for a deep venue, not an inflated one.
The takeaway
Always size against execution cost, not the headline spread. A 12% APR spread that costs 0.4% round-trip to enter needs the spread to persist long enough to clear that cost. ORBIT’s backtester does this math for you on real data — run your pair before you trade.