Tools › Funding rate calculator
Turn a perpetual’s funding rate into an annual figure, see what it pays over your holding period, and find how long a carry trade must run to repay its fees.
Funding accumulates each settlement; fees are paid once, up front. The crossing is your breakeven.
A perpetual future has no expiry, so nothing forces its price back to spot. Funding is the tether: at fixed intervals, usually every eight hours, one side pays the other. When the perp trades above spot the rate is positive and longs pay shorts; when it trades below, the flow reverses. The exchange takes none of it — the payment passes between traders, which is why a market-neutral position can harvest it.
At eight-hour funding there are 1095 settlements a year. That is a lot of compounding, and treating the annual figure as a simple multiple quietly loses money on paper. A rate of 0.01% per interval is 10.95% APR but 11.57% APY. Push the rate to 0.10% — not unusual when the market is euphoric — and the same arithmetic gives 109.5% APR against 198.75% APY. The gap is nearly the whole figure again.
Losses compound more gently than gains: each payment shrinks the base the next one lands on. So a payer of funding suffers slightly less than the simple number suggests, and a receiver earns slightly more.
Harvesting funding — short the perp, hold the spot — looks like free money until the fees arrive. The toll is paid once, on both legs, in and out. The funding arrives in drips. So the trade only makes sense if you hold it long enough for the drips to cover the toll:
At a 0.20% all-in round trip and a 0.01% eight-hour rate, that is 20 settlements — nearly seven days before the position has earned back its own costs. Enter and exit inside that window and the carry was a fee-generating exercise. Worse, the rate is not fixed: it resets every interval and can flip negative, at which point the position pays instead of collects and the breakeven recedes for good.
The funding rate here is held constant, and in reality it is re-set every interval from the perp’s premium to spot. Historical funding has been strongly regime-dependent, with sustained positive rates concentrated in bull markets and negative stretches during drawdowns, so an annualised figure taken from today’s rate is a snapshot rather than a forecast. Also excluded: slippage, the spot leg’s borrowing or custody costs, margin requirements on the short, and the liquidation risk that a delta-neutral position still carries if the two legs are margined separately.
Multiply the rate by the number of settlements in a year. With eight-hour funding that is 1095 settlements, so a rate of 0.01 percent annualises to about 10.95 percent. Reinvesting each payment instead gives the compounded figure, which is higher.
When the rate is positive, longs pay shorts, because the perpetual is trading above spot. When it is negative the flow reverses and shorts pay longs. The exchange never takes the payment; it passes between traders.
Long enough for the funding collected to exceed the round-trip fees on both legs. Divide the total fee by the funding rate per settlement to get the number of settlements, then convert to days. If the rate turns against you, it never breaks even.
The closed forms are checked against a settlement-by-settlement simulation: funding is paid one interval at a time, optionally folded back into the position, and the totals must match to the cent across a range of notionals, rates, and holding periods. The breakeven is verified twice over — once by the formula and once by stepping through settlements until the collected funding covers the fees — and the two must land on the same interval.
It also pins the invariants: eight-hour funding settles 1095 times a year, APY exceeds APR with the gap widening as the rate rises, compounding cushions a payer while it helps a receiver, higher fees push the breakeven further out, and a negative rate reports no breakeven at all rather than a misleading number.
You can run it yourself: verification/funding_rate.py.