Crypto Funding Rate Arbitrage with a Spot and Perpetual Hedge
Summary
The document describes a delta-neutral crypto strategy that pairs long spot holdings with an equal-notional short perpetual futures position. The matched positions are intended to offset broad price moves, leaving funding payments as the main source of return. The strategy is presented as a way to seek funding income rather than as protection for an already owned spot position. Its stated condition for viability is that funding remain elevated over several days, rather than relying on one unusually high observation.
The discussion identifies three constraints: funding can turn negative and reverse the payment direction, changes in the futures-to-spot basis can reduce the hedge’s value at exit, and trading fees or the cost of tied-up margin can outweigh collected funding when rates are low. It gives a conceptual explanation but no backtest, measured returns, sizing rules, venue comparisons, or evidence that the required funding conditions will persist. The educational strategy description is surrounded by extensive brokerage and jurisdictional disclosures, which do not add quantitative support.
Key ideas
- A long spot position paired with an equal-notional short perpetual position aims to neutralize directional exposure.
- Funding payments, rather than broad price changes, are intended to drive the strategy’s returns.
- Persistently elevated funding is presented as more useful than a single high reading.
- Negative funding, basis changes, fees, and margin opportunity costs can erode or reverse returns.
- The document explains the mechanism but provides no measured performance evidence.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.