Perpetual Futures Funding-Rate Strategies: Fees, Hedging, and Execution Risk
Summary
The author discusses practical issues in compounding returns from perpetual-futures funding-rate strategies. They describe high taker fees and possible price slippage during hedging, the need to correctly complete a partially executed leg, and a profit threshold that can prevent trades when expected funding income is too low after fees. Maker execution is proposed as a way to reduce costs and allow more entries, but introduces uncertainty about whether orders fill and how to handle one-sided exposure.
A less hedged approach that opens positions to collect funding is described as particularly risky: positions can become trapped and require substantial stop-losses. The author reports a short period of positive returns, while noting that most positions were unhedged and results were unstable. This is an anecdotal account rather than a controlled performance study; it offers no general evidence that funding-rate compounding is reliable or that optimizing entry timing removes the exposure risk.
Key ideas
- Taker fees and slippage can materially reduce funding-rate strategy profits, especially during hedging.
- A trade threshold that accounts for fees can keep the strategy out of low-margin opportunities.
- Maker orders may lower costs but create fill uncertainty and partial-leg exposure.
- Collecting funding without a hedge can lead to trapped positions and large stop-losses.
- The reported short-term return is anecdotal and does not establish strategy stability.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.