In plain English
What Funding rate means
Funding is usually calculated from a contract’s premium or discount to spot and an interest component under the venue’s formula. With a positive rate, longs typically pay shorts; with a negative rate, shorts typically pay longs. Payment occurs only for positions open at the platform’s specified funding timestamp, and intervals can differ by contract.
Why it matters
Funding can materially affect the cost of holding a perpetual position, particularly over repeated intervals or with large notional exposure. It is calculated on position value rather than simply on the margin posted. A favorable funding receipt is not guaranteed and does not offset the risk of adverse price moves or liquidation.
Example
At a funding timestamp, a trader holds a $25,000 long perpetual position and the funding rate is +0.012%. The funding payment is $3.00 ($25,000 × 0.00012), ignoring venue-specific rounding. Because the rate is positive, the long pays $3.00 and an eligible short holder receives the corresponding funding amount.
Quick answers
Common questions
Who receives a positive funding rate?+
In the common perpetual-contract convention, a positive funding rate means long positions pay and short positions receive funding. The exact timing and calculation are set by the exchange, so the contract specification should be checked before trading.
Is funding charged when a position is closed before the timestamp?+
Usually, no payment applies if the position is not open at the exchange’s funding timestamp. However, platform rules differ, and closing or reopening a position can still involve trading fees, spread costs, and price movement.
Sources