What Is the Risk of Holding a Position through a High Funding Rate Period?
The risk of holding a position through a high funding rate period is the potential for significant, recurring costs that can erode profits or exacerbate losses. If a trader is on the side paying the high rate (e.g. long in a high positive rate environment), the cost of holding the position can become prohibitive, potentially leading to an earlier liquidation.
Glossar
High Funding Rate
Sentiment ⎊ A high funding rate, particularly a positive one, is a direct quantitative signal indicating significant net long exposure across the perpetual futures market.
Funding Rate
Cost ⎊ The Funding Rate is the periodic payment exchanged between long and short positions in perpetual futures contracts, designed to anchor the contract price to the underlying spot index price.