Funding Arbitrage Glossary

Plain-English definitions of the terms you need to trade funding-rate arbitrage on perpetual futures — funding, delta-neutral, basis, slippage and more.

APR (Annualized Funding): APR (annualized funding) scales a per-interval funding rate to a yearly figure by multiplying it by the number of funding periods in a year — the core carry metric for arb.
Basis: Basis is the gap between a perpetual futures price and its spot index. Learn how basis drives funding rates and shapes delta-neutral arbitrage returns.
Collateral: Collateral is the deposited crypto or stablecoin that backs a perpetual futures position. It determines your margin, leverage and liquidation buffer on every exchange.
Convergence Trade: A convergence trade profits when two prices expected to meet actually converge. In funding arbitrage, it means holding a delta-neutral spread until it collapses to fair value.
Cross-Margin: A margin mode where all positions in an account share one collateral pool.
Delta-Neutral: A position with zero net directional exposure — gains on one leg offset losses on the other, isolating a non-price return like funding.
Funding Interval: Funding interval is how often a perpetual swap settles funding — 1h, 4h, or 8h. It sets how many times per year a rate compounds, so it drives APR.
Funding Rate: A funding rate is the periodic payment exchanged between long and short perpetual traders that keeps the perp price pinned to the underlying spot price.
Funding Rate Arbitrage: A delta-neutral strategy that harvests perpetual-futures funding payments while hedging out price risk.
Funding Spread: Funding spread is the gap between two venues’ funding rates on the same asset — the raw signal a funding-rate arbitrageur harvests. Learn how to read it.
Funding Volatility: Funding volatility measures how much a perpetual’s funding rate swings over time. High volatility erodes carry-trade edge and forces tighter monitoring in funding arbitrage.
Index Price: Index Price is the fair spot value of an asset, aggregated from multiple exchanges, that anchors mark price and funding on perpetual futures.
Leverage: Leverage lets a trader control a position larger than their margin. Learn how it scales gains and losses, sizes liquidation risk, and its role in funding-rate arbitrage.
Liquidation: Liquidation is the forced closing of a leveraged perpetual position when margin falls below maintenance requirements. Learn how it works and why it matters for funding arbitrage.
Liquidation Price: The mark price at which an exchange force-closes a leveraged position because remaining margin no longer covers maintenance requirements.
Maintenance Margin: Maintenance margin is the minimum equity you must hold to keep a perpetual position open. Drop below it and liquidation triggers. See how it shapes funding arbitrage.
Maker Fee: What a maker fee is: the (often lower or negative) fee for adding liquidity to the orderbook with a limit order. Key to cutting funding-arbitrage costs.
Mark Price: A smoothed reference price, derived from the index price, used to value positions, calculate unrealized PnL, trigger funding, and decide liquidations — instead of the volatile last traded price.
Notional Value: The total market value of a position — contract size times mark price — not the margin you posted.
Open Interest: The total number of outstanding derivative contracts that have not been settled or closed.
Perpetual Futures: A derivatives contract that tracks an asset's price with no expiry, held to its spot index by a periodic funding payment between longs and shorts.
Points & Airdrop: Points & airdrops are pre-token loyalty rewards perp DEXs grant for trading volume, later convertible to a token drop — a second yield stream for funding arbitrageurs.
Predicted vs Realized Funding: Predicted funding is the estimated next-interval rate shown pre-settlement; realized funding is the rate actually charged at settlement. The gap decides real arbitrage PnL.
Price Impact: Price impact is how much your own order moves the market price by consuming orderbook depth. Learn how it eats funding-arb edge and how to size around it.
Settlement (Funding): Settlement is the moment a perp exchange debits the funding payment from one side and credits the other. Timing, sign and realized rate all matter for funding arbitrage.
Slippage: Slippage is the gap between the price you expect and the price you actually fill at. Learn how it eats funding-arbitrage edge and how to model it.
Taker Fee: Taker fee is the commission charged for market orders that fill instantly against the order book. Learn how taker fees eat funding-arbitrage profits.

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Funding Arbitrage Glossary

Plain-English definitions of the terms you need to trade funding-rate arbitrage on perpetual futures — funding, delta-neutral, basis, slippage and more.

APR (Annualized Funding): APR (annualized funding) scales a per-interval funding rate to a yearly figure by multiplying it by the number of funding periods in a year — the core carry metric for arb.
Basis: Basis is the gap between a perpetual futures price and its spot index. Learn how basis drives funding rates and shapes delta-neutral arbitrage returns.
Collateral: Collateral is the deposited crypto or stablecoin that backs a perpetual futures position. It determines your margin, leverage and liquidation buffer on every exchange.
Convergence Trade: A convergence trade profits when two prices expected to meet actually converge. In funding arbitrage, it means holding a delta-neutral spread until it collapses to fair value.
Cross-Margin: A margin mode where all positions in an account share one collateral pool.
Delta-Neutral: A position with zero net directional exposure — gains on one leg offset losses on the other, isolating a non-price return like funding.
Funding Interval: Funding interval is how often a perpetual swap settles funding — 1h, 4h, or 8h. It sets how many times per year a rate compounds, so it drives APR.
Funding Rate: A funding rate is the periodic payment exchanged between long and short perpetual traders that keeps the perp price pinned to the underlying spot price.
Funding Rate Arbitrage: A delta-neutral strategy that harvests perpetual-futures funding payments while hedging out price risk.
Funding Spread: Funding spread is the gap between two venues’ funding rates on the same asset — the raw signal a funding-rate arbitrageur harvests. Learn how to read it.
Funding Volatility: Funding volatility measures how much a perpetual’s funding rate swings over time. High volatility erodes carry-trade edge and forces tighter monitoring in funding arbitrage.
Index Price: Index Price is the fair spot value of an asset, aggregated from multiple exchanges, that anchors mark price and funding on perpetual futures.
Leverage: Leverage lets a trader control a position larger than their margin. Learn how it scales gains and losses, sizes liquidation risk, and its role in funding-rate arbitrage.
Liquidation: Liquidation is the forced closing of a leveraged perpetual position when margin falls below maintenance requirements. Learn how it works and why it matters for funding arbitrage.
Liquidation Price: The mark price at which an exchange force-closes a leveraged position because remaining margin no longer covers maintenance requirements.
Maintenance Margin: Maintenance margin is the minimum equity you must hold to keep a perpetual position open. Drop below it and liquidation triggers. See how it shapes funding arbitrage.
Maker Fee: What a maker fee is: the (often lower or negative) fee for adding liquidity to the orderbook with a limit order. Key to cutting funding-arbitrage costs.
Mark Price: A smoothed reference price, derived from the index price, used to value positions, calculate unrealized PnL, trigger funding, and decide liquidations — instead of the volatile last traded price.
Notional Value: The total market value of a position — contract size times mark price — not the margin you posted.
Open Interest: The total number of outstanding derivative contracts that have not been settled or closed.
Perpetual Futures: A derivatives contract that tracks an asset's price with no expiry, held to its spot index by a periodic funding payment between longs and shorts.
Points & Airdrop: Points & airdrops are pre-token loyalty rewards perp DEXs grant for trading volume, later convertible to a token drop — a second yield stream for funding arbitrageurs.
Predicted vs Realized Funding: Predicted funding is the estimated next-interval rate shown pre-settlement; realized funding is the rate actually charged at settlement. The gap decides real arbitrage PnL.
Price Impact: Price impact is how much your own order moves the market price by consuming orderbook depth. Learn how it eats funding-arb edge and how to size around it.
Settlement (Funding): Settlement is the moment a perp exchange debits the funding payment from one side and credits the other. Timing, sign and realized rate all matter for funding arbitrage.
Slippage: Slippage is the gap between the price you expect and the price you actually fill at. Learn how it eats funding-arbitrage edge and how to model it.
Taker Fee: Taker fee is the commission charged for market orders that fill instantly against the order book. Learn how taker fees eat funding-arbitrage profits.

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