How Does a Positive Funding Rate Affect a Long Position? ▴ Learn

How Does a Positive Funding Rate Affect a Long Position?

A positive funding rate means that the perpetual contract is trading at a premium to the spot price, indicating that there is higher demand for long positions. Consequently, traders holding a long position must pay the funding rate to traders holding a short position.

This payment acts as a cost to the long holder and a reward to the short holder, incentivizing arbitrage to push the contract price back towards the spot price.

What Is the “Funding Rate” in Perpetual Futures and How Does It Affect a DAO’s Hedge Cost?

What Is the ‘Funding Rate’ in a Perpetual Swap and Who Pays It?

Does a Negative Funding Rate Increase or Decrease the Cost of Holding a Long Position?

What Is the Maximum Holding Period for a Short-Term Capital Gain?