Funding Rate Arbitrage Between Perp DEXs: The Real Math

A yearly funding spread is a speed, not a distance. It tells you how fast a hedge earns while the spread lasts, not what you take home. The fees are paid up front, the spread can flip within hours, and each leg sits on its own venue with its own margin. Whether the trade pays is decided by how long you hold, how big you trade and what it costs to get in and out.

For what funding is, see What Is a Funding Rate on a Perp DEX?. For how fees are charged, see Maker vs Taker Fees. This page is about the trade itself, and it is a method, not financial advice.

Quick answer

Short the coin where funding is higher, go long the same dollar size where it is lower, and collect the gap: the spread. Price moves roughly cancel out. You pay a fee on four fills, open and close on each venue. The trade works only if the spread, over the hours it actually lasts, beats those fees plus slippage and any price gap between the venues.

What does the trade earn?

Spread = rate where you short - rate where you go long

Bring both rates to the same clock first. Keep both legs the same size in dollars, so a move that loses on one leg makes about the same on the other. If the long leg’s rate is negative, you receive on both sides.

Why do four fills decide the result?

Funding arrives by the hour. Fees are paid once, at the start and the end. The shorter the hold, the more of the spread they eat.

Example numbers: $1,000 per leg, the short leg pays 0.0125% per hour, the long leg 0.00125% per hour, and both venues charge an example taker fee of 0.045%.

• Spread: 0.01125% per hour, about 98.6% a year
• Funding earned: $0.1125 an hour, $2.70 a day
• Four taker fills: 4 x $0.45 = $1.80

The same 98.6% spread pays a third of that over one day. The general rule:

Net (yearly) = spread - (four fees x 365 / days held)

Every figure assumes the spread holds for the whole period. It will not stay exactly the same, and it can flip.

How long must the spread last?

Divide the four fees by what the spread earns per hour. In the example, $1.80 / $0.1125 = 16 hours. If the spread closes before then, the trade loses money even though every funding payment went your way. A break-even of a few hours leaves room for bad luck. A break-even of several days needs the spread to last several days, and few do.

When is a spread too thin?

When a market sits near the baseline rate on every venue. Say the best pair shows 0.9% a year. On $1,000 per leg over 7 days, that earns about $0.17. If one venue charges 0.025% per fill, opening and closing there costs $0.50, three times the funding. The net is about -1.7% a year. Spreads worth checking show up where one side is crowded.

What can break the hedge?

• Rates flip. The spread you entered on is a reading, not a contract. When it reverses, the hedge pays instead of earning.
• Price gap. Two venues can quote different prices for the same coin. A gap that moves against you can wipe out days of funding: in the example, 0.3% on $1,000 is $3, more than a day of spread.
• Liquidation on one leg. Each leg has its own margin. A sharp move can liquidate the losing leg while the winning leg’s profit sits on another exchange. Keep margin on both sides and neither leg near its liquidation price.
• Size against the book. Thin books cost slippage on the way in and again on the way out.
• Different clocks. The legs may not pay at the same moments, so check when each pays before you time a close.
• Same ticker, different market. A matching name does not prove a matching asset.

What this means for a farmer

A hedge can hold volume on two venues while funding covers part of the cost, but only with a planned hold: a same-day round trip pays all four fills against a few hours of spread. Zero-fee accounts come with conditions such as speed bumps. Maker orders cut fees, but a resting order may not fill, and an unfilled leg leaves you holding one side with no hedge.

Checks before you open a pair

1. Pick a hold you will keep, and read the net for that hold, not the spread.
2. Work out the break-even in hours.
3. Read the per-hour rates on both legs, not only the yearly figure.
4. Check 24h volume, open interest and the price gap on both legs.
5. Open both legs close together, at the same dollar size.
6. Decide in advance when you will close, for example when the spread falls below the cost to exit.

Our funding scanner brings every venue to one clock and shows the net after four taker fills for your size and hold. It hides markets where your size per leg is over 1% of 24h volume or 5% of open interest, and it leaves out slippage and price moves. Current fees are on each project page: Hyperliquid, Lighter, Aster, Paradex, Extended.

Frequently asked

Is funding rate arbitrage risk-free? No. Rates change every hour, prices differ between venues, and one leg can be liquidated while the other sits elsewhere.

How much spread do I need? Enough to pay back four fills well before the spread is likely to close.

What is a good holding period? Short holds put more weight on fees. Long holds carry more risk that the spread changes.

Do I need an account on each venue? Yes, with margin on each. Check each project page for regions and deposits.