Cash-and-Carry Funding Rate Arbitrage in Perpetual Futures

Summary

The document describes a cash-and-carry strategy for crypto perpetual futures. When a perpetual contract trades above spot and its funding rate is positive, the trader sells the perpetual and buys an equivalent amount of spot, aiming to collect funding payments while holding the hedge. The proposed workflow screens assets using historical funding rates, enters both legs when the current rate clears a threshold, and closes positions when rates fall or market conditions raise risk.

The article recommends avoiding entries during steep negative premiums, spreading hedges, using restrained leverage, and closing positions promptly when needed. It says the approach can operate in bull and bear markets, while acknowledging that average funding may decline in a bear market. These are strategy claims, not demonstrated results: the document supplies no backtest, return series, fee or slippage analysis, or precise entry thresholds. Funding can change sign, and the hedge remains exposed to execution, basis, margin, and liquidation risks, so the advertised low-risk characterization is not established by evidence here.

Key ideas

• A positive funding rate can pay traders who short a perpetual contract while holding an offsetting spot position.
• The proposed process screens historical rates, enters both legs above a chosen rate threshold, and closes when rates weaken or risks rise.
• The document advises avoiding steep negative premiums and limiting leverage to manage funding and liquidation risks.
• It provides no quantitative performance evidence, and funding and basis conditions can change.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.