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Funding

Funding is an hourly exchange of payments between people that hold long positions and people that hold short positions. The purpose of this payment exchange is to keep the Last Traded Price on Everstrike close to the Everstrike Index Price. By forcing longs to pay money to shorts, whenever the Last Traded Price is above the Everstrike Index Price, the Last Traded Price will gradually move towards the Everstrike Index Price. This happens because the payment dis-incentivizes being long.
By likewise forcing shorts to pay money to longs, whenever the Last Traded Price is below the Everstrike Index Price, the same will happen once again. The Last Traded Price will move towards the Everstrike Index Price. The Funding Rate
The Funding Rate determines the amount that is transferred between longs and shorts every hour. It is calculated as the relative difference between the Index Price and the Mark Price - also known as the premium. The premium is calculated as follows: ((Mark Price - Index Price) / Index Price) * Interest where Interest is the 8 hour interest rate on the Future's underlying asset. Once the premium is obtained, the Funding Rate can be calculated by taking the premium and applying a dampener: Max(dampener, Premium) + Min(dampener, Premium) The dampener can vary by trading pair. For the Bitcoin Perpetual Future, it is currently set to 0.01 (1%). The dampener ensures that the Funding Rate can only ever be within an interval of [-dampener,+dampener] To calculate the funding on a Bitcoin options position, we must first scale the funding rate to reflect only the interval for which funding takes place: Scaled Funding Rate = (Funding Interval/Funding Time Window) where the Funding Time Window is 8 hours and the Funding Interval is 0.5 hours. Then simply multiply the Scaled Funding Rate with the size of the position to get the amount to exchange: Funding Amount = Scaled Funding Rate * Position Size (Bitcoin)