Spot–Perpetual Funding-Rate Carry with Diversified Hedging

Summary

The strategy seeks funding payments by holding long spot and an offsetting short perpetual futures position. When perpetual contracts trade at a premium and funding is positive, longs pay shorts; the paired positions are intended to reduce exposure to the underlying coin's price direction. The described process selects assets using historical and current funding thresholds, opens spot and futures legs at a matched value, and may close positions when rates or price movements breach specified limits. Iceberg orders are proposed for both entries and exits to reduce market impact.

The document discusses negative funding, changing spot–perpetual spreads, liquidation, and the possibility that a prolonged bear market reduces carry or increases adverse funding. It proposes diversification across many assets and monitoring margin, but gives no measured backtest or independently supported return evidence. Funding can change, the hedge can be imperfect, and fees, execution, basis movement, and liquidation risk can undermine the intended neutrality. The approach is therefore a funding carry strategy whose returns depend on funding and operating conditions, rather than a guaranteed arbitrage.

Key ideas

• The core position pairs long spot with short perpetual futures to seek funding income while reducing directional exposure.
• Asset selection and entry are based on historical and current funding thresholds.
• The document recommends monitoring negative funding and spread conditions, and closing positions when thresholds are breached.
• Diversifying across assets and managing collateral are proposed responses to funding and liquidation risks.
• No performance study is presented, and funding, basis, fees, and execution can all affect realized returns.

Tags

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