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 expresses a per-interval funding rate as an annual percentage so rates on different settlement schedules can be compared directly.
- Basis
- Basis is the difference between a perpetual (or future) price and the underlying spot price. Funding exists to drive the basis toward zero.
- Collateral
- Collateral is the margin you deposit to open and maintain a leveraged position. It absorbs losses until the maintenance-margin level triggers liquidation.
- Convergence Trade
- A convergence trade profits when a temporary price gap between two venues closes — distinct from funding arbitrage, which earns the funding spread.
- 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
- The funding interval is how often a perpetual settles funding — commonly every 1, 4, or 8 hours. It affects payment timing, not annualized rate.
- Funding Rate
- The funding rate is the periodic payment between long and short traders that keeps a perpetual futures price tethered to spot. Learn how it works.
- Funding Rate Arbitrage
- A delta-neutral strategy that harvests perpetual-futures funding payments while hedging out price risk.
- Funding Spread
- The funding spread is the gap between the highest and lowest funding rate for an asset across exchanges — the raw edge in funding arbitrage.
- Funding Volatility
- Funding volatility is how much an asset’s funding rate swings between settlements. Volatile funding makes a high headline APR unreliable for arbitrage.
- Index Price
- The index price is the reference spot price (an average across spot markets) that a perpetual’s mark price and funding rate are anchored to.
- Leverage
- Leverage multiplies your market exposure relative to collateral. 10× means $1k controls $10k — amplifying both funding income and liquidation risk.
- Liquidation
- Liquidation is the forced closure of a leveraged position when its margin can no longer cover losses. The key risk in any leveraged trade.
- 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 a leveraged position must keep before liquidation. Fall below it and the exchange closes the trade.
- Maker Fee
- A maker fee (often a rebate) applies when your limit order adds liquidity to the book. Lower than the taker fee; sometimes negative.
- 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 are pre-token loyalty credits some perp DEXs award for trading; they may convert to a future token airdrop. A second yield on the same capital.
- Predicted vs Realized Funding
- Predicted funding is the live estimate for the next settlement; realized funding is what was actually paid. Aggregators may differ on which they show.
- Price Impact
- Price impact is how much your own order moves the market price as it consumes order-book depth. It is the size-dependent core of slippage.
- Settlement (Funding)
- Settlement is the moment funding is actually paid between longs and shorts. Holding across a settlement is what earns or costs you the funding rate.
- Slippage
- Slippage is the difference between the expected price and the actual fill price when an order walks the order book. A real arbitrage cost.
- Taker Fee
- A taker fee is charged when your order removes liquidity (fills against the book). It is the main per-trade cost in funding arbitrage.
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