Funding
Funding is an hourly payment exchange between longs and shorts that keeps perpetual markets aligned with spot.
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Funding is an hourly payment exchange between longs and shorts that keeps perpetual markets aligned with spot.
Funding is an hourly exchange of value between traders with long positions and traders with short positions. It keeps the Mark Price close to the Index Price.
Positive funding rate: longs pay shorts.
Negative funding rate: shorts pay longs.
When the Mark Price is above the Index Price, funding is positive. This makes long exposure more expensive and short exposure more attractive.
When the Mark Price is below the Index Price, funding is negative. This makes short exposure more expensive and long exposure more attractive.
The funding rate determines how much value is exchanged every hour.
Premium = (Mark Price - Index Price) / Index Price
Where:
Mark Price is the Everstrike Mark Price of the contract.
Index Price is the Everstrike Index Price of the contract.
Premium is the relative gap between the two, expressed as a decimal. For example, 0.01 = 1%.
Base Funding Rate = Min(dampener, Max(-dampener, Premium))
This caps the base funding rate to the interval [-dampener, +dampener].
The dampener varies by product:
Perpetual futures: 0.03 = 3%
Perpetual options: 1.00 = 100%
These values can change.
Funding Rate = Base Funding Rate * (Funding Interval / Funding Period)
On Everstrike:
Funding Period = 10 hours
Funding Interval = 1 hour
This means each hourly funding exchange applies one tenth of the capped 10-hour base rate.
Funding Payment = Funding Rate * Position Size (USD)
Position Size (USD) refers to the position notional in USD.
For directional positions:
Funding (Long) = -Funding Rate * Position Size (USD)
Funding (Short) = Funding Rate * Position Size (USD)
Suppose a perpetual future has:
Mark Price = 101
Index Price = 100
Position Size = 10,000 USD
dampener = 0.03
First calculate the premium:
Premium = (101 - 100) / 100 = 0.01 = 1%
Then cap the premium with the dampener:
Base Funding Rate = Min(0.03, Max(-0.03, 0.01)) = 0.01
Then scale it to the hourly interval:
Funding Rate = 0.01 * (1 / 10) = 0.001 = 0.1%
Finally, calculate the payment:
Funding Payment = 0.001 * 10,000 = 10 USD
Because the funding rate is positive:
The long pays 10 USD.
The short receives 10 USD.
For perpetual futures, the hourly funding rate is capped at 0.3% because the base rate is capped at 3% and the funding interval is one tenth of the funding period.
Everstrike exchanges funding during the first five seconds of each hour. During this window, Everstrike snapshots open positions and debits or credits each trader's margin balance.
Trading is disabled during the first ten seconds of each hour.
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