Funding Rate Arbitrage
The strategy that lets you profit from funding rate differences across exchanges , regardless of which way the market moves. Here's exactly how it works, when it works, and when it doesn't.
1. What are funding rates?
Perpetual futures don't have an expiry date, so they need a mechanism to stay anchored to the spot price. That mechanism is the funding rate , a periodic payment between longs and shorts.
Longs pay shorts. The perp is trading above spot. Market is bullish/overleveraged to the upside.
Shorts pay longs. The perp is trading below spot. Market is bearish/overleveraged to the downside.
Most exchanges settle funding every 8 hours (00:00, 08:00, 16:00 UTC). Some DEXes like Hyperliquid and Drift settle hourly. gTrade accrues continuously per block.
Typical rates range from +0.01% to -0.01% per 8h in calm markets. During high volatility, rates can spike to 0.1%+ per 8h , that's 4.5% per day annualized.
2. How funding rate arbitrage works
The core idea is simple: collect funding payments while being market-neutral. You do this by holding opposite positions that cancel out price risk.
Type 1: Spot-Perp Arbitrage (Cash & Carry)
When funding is positive (longs paying shorts):
Type 2: Cross-Exchange Perp Arbitrage
When the same asset has different funding rates on two exchanges:
3. Step-by-step execution
Scan for spread
Go to /funding on InfoHub. Switch to Arbitrage view. Sort by spread descending. Look for pairs where the funding difference is > 0.03%/8h (after fees).
Check liquidity
Verify both exchanges have sufficient depth for your position size. Check OI on /open-interest. Thin markets = slippage = lost edge.
Calculate net after fees
Trading fees (taker: ~0.04-0.06%), funding fees, and borrowing costs eat into your spread. The net must be positive after ALL costs.
Open positions simultaneously
Speed matters. Open both legs at the same time (or within seconds). Use limit orders if possible to reduce taker fees. Same notional size on both sides.
Monitor and rebalance
Check funding rates every 8h. If the spread closes or inverts, close both positions. Watch for liquidation risk on the losing side.
Close when spread dies
Funding rates mean-revert. When the spread narrows below your fee threshold, close both sides and take profit.
4. Finding opportunities on InfoHub
InfoHub aggregates funding rates from 33 exchanges in real-time. Here's how to use it to find arb opportunities:
Funding Arbitrage View
Go to /funding and click the Arbitrage tab. This shows the highest and lowest funding rates for each symbol across all exchanges, with the spread calculated for you.
Sort by spread to find the juiciest opportunities. Look for spreads > 0.03%/8h on major coins (BTC, ETH, SOL) with good liquidity on both sides.
Funding Heatmap
The /funding-heatmap shows 7-day funding trends per symbol. Look for symbols where one exchange is consistently deep green (positive) while another is deep red (negative). Persistent divergence = sustainable arb.
Screener Filters
Use the /screener with "High Funding" or "Negative Funding" presets to quickly find symbols with extreme rates. Cross-reference with OI to ensure there's enough liquidity.
5. Real numbers: what to expect
| Scenario | Spread /8h | Daily | APR | On $10K |
|---|---|---|---|---|
| Calm market | 0.01% | 0.03% | ~11% | $3/day |
| Mild divergence | 0.03% | 0.09% | ~33% | $9/day |
| Strong divergence | 0.05% | 0.15% | ~55% | $15/day |
| Extreme (rare) | 0.10%+ | 0.30%+ | ~110%+ | $30+/day |
6. Risks and gotchas
Funding rate inversion
The rate can flip against you. What was +0.05%/8h can become -0.05%/8h in one settlement. Always have stop-loss levels.
Liquidation on one leg
If the price moves sharply, one side of your arb can get liquidated while the other side stays open. Now you're exposed. Use low leverage (2-3x max).
Exchange counterparty risk
Your funds are on two different exchanges. If one gets hacked or pauses withdrawals, you're stuck with a one-sided position.
Slippage on entry/exit
Opening and closing both legs simultaneously is hard. Even a few seconds delay means slippage, especially on volatile assets.
Capital inefficiency
You need margin on two exchanges. With 3x leverage, a $10K arb ties up ~$6.7K in margin. During that time, your capital isn't earning elsewhere.
Withdrawal delays
If you need to rebalance margin between exchanges, blockchain confirmations can take 10-60 minutes. The arb might close before your transfer arrives.
7. Advanced: multi-leg and cross-exchange
Once you're comfortable with basic funding arb, here are ways to scale:
CEX vs DEX arbitrage
DEXes (Hyperliquid, dYdX, Drift) often have different funding dynamics than CEXes (Binance, Bybit, OKX). DEX funding is driven by smaller, more volatile pools , creating bigger spreads. The trade-off is higher gas costs and slower execution.
Multi-asset rotation
Don't stick to one pair. Rotate between whichever symbol has the best spread today. Use the InfoHub Arbitrage view to scan all symbols at once. Altcoins often have wider spreads than BTC/ETH but with thinner liquidity.
Funding rate mean reversion
Extreme funding rates tend to snap back. When you see funding at 0.1%+ on an asset, it often corrects within 24-48 hours. Timing the entry at peak funding and exiting as it normalizes captures both the funding payments AND the convergence.
8. Pre-trade checklist
Ready to scan for arb?
InfoHub shows live funding rates from 33 exchanges. The Arbitrage view calculates spreads for you.
This guide is for educational purposes only and does not constitute financial advice. Funding rate arbitrage involves real financial risk including potential loss of capital. Always do your own research and trade responsibly.