Our dated futures are designed to track the price of the underlying asset — like Bitcoin, an equity index, or a stock — as closely as possible. The funding rate is the mechanism that makes this happen.
Because our contracts have a five-year maturity rather than expiring in days or weeks, the contract price does not naturally converge toward the spot price the way a short-dated future would. Instead, the funding rate continuously nudges the contract price back into alignment with spot by creating a financial incentive for traders to take balancing positions.
How it works
A funding payment is exchanged between traders holding long positions and traders holding short positions — depending on whether the contract price is trading above or below the spot price.
- Contract price above spot (positive funding rate) — long position holders pay short position holders. This incentivises traders to short the contract, pushing the price back down toward spot.
- Contract price below spot (negative funding rate) — short position holders pay long position holders. This incentivises traders to go long, pushing the price back up toward spot.
Funding schedule: crypto vs. equity futures
The funding schedule differs depending on the asset class:
- Crypto futures: funding payments are exchanged every four hours, 24/7.
- Equity futures: funding payments are exchanged twice per day, during US market hours only, with a gap of 3 hours and 15 minutes between the two daily windows. No funding payments are processed outside of US market hours.
What determines the funding rate?
The funding rate is calculated based on the difference between the contract price and the spot price over an averaging window. Averaging over a period — rather than reacting to every price tick — smooths out short-term volatility and keeps the funding rate predictable.
Minor deviations between the contract price and spot do not trigger funding payments unless they exceed a predefined threshold. This prevents unnecessary adjustments from small, temporary price movements.
The funding rate also operates within a capped range, meaning it cannot exceed a maximum value. This keeps funding costs predictable and prevents extreme market conditions from generating outsized charges.
What does this mean for you as a trader?
- Cost of holding positions — if the funding rate is consistently positive or negative, holding a position for an extended period will incur funding costs. Factor this into your strategy, especially for longer-held positions.
- Market sentiment signal — a strongly positive funding rate generally reflects bullish market sentiment; a negative rate suggests bearish sentiment. Some traders use this as an additional indicator.
- It applies automatically — funding payments are calculated and applied to your account automatically, based on the schedule for your asset class.
Investing involves risks. The value of investments can go up as well as down and you may receive back less than your original investment or lose your entire investment. Investing with leverage means the value of your investment fluctuates more than the price of the underlying asset. One Trading does not provide investment advice and investors should make their own decisions or seek independent advice.