How Funding Arbitrage Works
Different exchanges have different funding rates for the same asset. These differences create arbitrage opportunities. By taking opposite positions, you capture the spread without directional exposure.
Arbitrage Example
You receive 0.005% every 8h
You receive 0.015% every 8h
≈ 21.9% APR annualized
Setting Up Positions
Step-by-Step Setup
Find exchanges with different funding rates for same asset
Determine position size accounting for fees and margin
Open both positions at same time to lock in spread
Rebalance if rates converge or positions drift
Best Exchanges for Arb
Hyperliquid
Often has different rates than CEXs. Hourly funding. Low fees. Good for one leg.
Binance / Bybit
High liquidity, standard 8h funding. Often reference rates. Good for stable leg.
dYdX
Different rate calculation. Can diverge from CEXs. Good for finding spreads.
Risks & Mitigation
Key Risks
- • Liquidation: One leg can get liquidated while other stays open
- • Rate convergence: Spread can close or reverse
- • Exchange risk: Counterparty risk on both venues
- • Execution: Slippage when opening/closing positions
Interactive Funding Tracker
Compare funding rates and identify arbitrage opportunities:
Arbitrage Opportunity
Long on lowest funding (Bybit) + Short on highest (Hyperliquid)
≈3.83% APR spread capture
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Frequently Asked Questions
Funding rate arbitrage profits from differences in funding rates between exchanges. If Binance pays 0.01% and Hyperliquid pays 0.02%, you can long on Binance (pay less) and short on Hyperliquid (receive more), capturing the spread with no directional risk.
Open equal-sized positions on two exchanges: long where funding is lower, short where funding is higher. Ensure positions are exactly matched for delta neutrality. You'll pay on one side and receive on the other—profit is the difference.
Spreads typically range 0.5-5% annualized during normal conditions. During volatile periods, spreads can reach 20-50% APR. Returns depend on spread size, position management, and fee optimization.
Risks include: liquidation on one leg if position isn't balanced, exchange risk (counterparty), funding rate convergence (spread closes), and execution risk when opening/closing positions. Requires margin on both exchanges.
You need margin on both exchanges. With 5x leverage on each, a $20k strategy might need $8k on exchange A and $12k on exchange B (covering both directions plus buffer). More margin = lower liquidation risk.