What funding rates cost per year
A funding rate of 0.01% looks like a rounding error. Charged three times a day on the whole position, it adds up to about 11% a year.
How this was made: an AI assistant drafted this guide under the operator's direction, and the numbers were checked against the calculators on this site. Nothing here is investment advice. Leveraged products can lose your entire margin.
What funding is
A perpetual future never expires, so nothing forces its price back to the spot price at a settlement date. Exchanges use a funding payment instead. At set times, usually every 8 hours, one side pays the other: when the rate is positive, longs pay shorts, and when it is negative, shorts pay longs. The payment is the position value times the rate. The exchange does not keep it.
The 0.01% baseline in a year
Many perpetual contracts use 0.01% per 8-hour interval as a baseline rate, which is what the rate sits at when the market is calm. It looks like nothing, and it is not nothing: 0.01% three times a day is 0.03% a day, or 10.95% a year without compounding. A long position held all year at the baseline pays about 11% of its value before any price move.
| Rate per 8 hours | Per year, % of position | Per year, % of margin at 10x |
|---|---|---|
| 0.005% | 5.47% | 54.8% |
| 0.01% | 10.95% | 109.5% |
| 0.03% | 32.85% | 328.5% |
| 0.05% | 54.75% | 547.5% |
| 0.1% | 109.50% | 1095.0% |
Leverage changes how it feels
Funding is charged on the position value, not on your margin. At 10x leverage, a cost of 10.95% of the position is 109.5% of the margin over a year. That is why funding matters little for a quick trade and a lot for a position left open for weeks.
Compared with trading fees
With a taker fee of 0.055% each way, opening and closing costs 0.11% of the position. At the 0.01% baseline, funding reaches that amount after 11 payments, a little under four days. A trade held for a day pays three funding payments and one round trip of fees, so fees dominate. A trade held for a month pays 90 payments, roughly 0.9%, which is eight times the fees.
When you are paid instead
If the rate is negative, longs receive and shorts pay. In markets where everyone is leaning one way, funding can be high in that direction for long stretches, and it can flip sign quickly when sentiment turns.
Some traders hold a long spot position and an equal short perpetual position, so the price risk cancels and the funding is what is left. It is a real strategy, but not a free one: it needs margin on the exchange, pays fees on both legs, depends on a rate that is not guaranteed, and carries the risk of the exchange itself. An annualised funding figure shown on a website is a past rate multiplied out, not a promise.
How to check yours
Look at the exchange's funding history for the contract you trade, enter a realistic rate and holding time in the funding rate cost calculator, and compare the result with the fees and the profit you expect. The futures PnL calculator has a field for funding paid.