Two positions.
One funding strategy.
Long on one exchange. Short on another.
Understand the return, the trade, and the risks.
Where the return comes from
Perpetual futures have no expiry. Funding payments between longs and shorts help keep their price aligned with spot. With positive funding, longs pay shorts; with negative funding, shorts pay longs.
Rates differ by exchange. A long on one and an equal short on another can collect net funding: receipts minus payments. The final result also includes both legs’ price gains or losses, including basis changes, and trading fees.
Does each leg have to receive funding?
Both legs may receive funding, or one may pay while the other receives more. Each venue has its own settlement schedule. Rates can change between intervals, so current funding is not a promise of future income. Price P&L uses actual entry and exit fills, so slippage is already reflected in those prices.
Total result = net funding + pair price P&L − fees
The hedged pair
The pair holds the same quantity of the same asset in opposite directions. If its price rises, the long gains while the short loses. If the price falls, the roles reverse. Try both directions in the diagram.
This offsets the asset’s price direction so the strategy can focus on funding. It does not eliminate every price effect: the two exchanges can quote different prices, and changes in that gap still affect the pair’s value.
Why must the quantities match?
An unmatched portion stays exposed to price moves. Equal quantities provide the hedge; equal cash balances on the venues alone do not. Closing only the profitable leg leaves the other as a directional position.
How a pair is chosen
Start with funding that both exchanges have already paid and published. The spread should stay consistent across the lookback window. A single attractive live rate is too little evidence to choose a pair.
Expected funding must cover entry and exit costs. Size each pair to the depth of both books, available margin and leverage, and portfolio concentration limits. Splitting orders helps execution, but the full position must still be manageable.
What does the deeper check include?
Check each part of the lookback window, not just one average. Both books should support several times the position size on both sides. Compare expected funding with full round-trip costs. Leverage increases exposure per unit of margin; allow for margin needs on each venue and limit concentration by asset and exchange.
Positive across the window
Room for entry and exit costs
Both books support the size
This is the kind of pair worth considering for entry.
Getting in and out
Before a planned entry or exit, wait for a suitable basis, the price difference between venues, using executable quotes. Both legs use maker limit orders: post a price and wait for another trader to fill it.
Build larger positions in small slices to limit market impact and slippage. Fill the thinner leg first, promptly hedge that quantity on the other venue, then consider the next slice. Pause new slices if the basis window closes.
How are partial fills and waiting handled?
Hedge the quantity actually filled, using maker orders, before increasing the next slice. If the basis moves away, pause new exposure; do not leave an existing fill unhedged while waiting for a new window. Compare executable quotes with the recent basis range, not just a chart or midpoint. Limit orders can fill partially or wait. On exit, work both legs off; never close just the profitable side.
Buy / long
0 of 4 slices filled◷ WaitingSell / short
0 of 4 slices filled◷ WaitingFunding alone is not enough. Check executable quotes on both venues and wait before opening the first slice.
When a position closes
A single negative payment is not a reversal. A sustained turn in settled net funding triggers the decision to exit. Execution then waits for a suitable basis and fills on both venues; the signal is not the completed exit.
There is no fixed holding period or price target. If funding only fades, rotate when a better executable pair justifies switching costs. Keep monitoring margin while an exit waits; safety problems can require action before a favourable window.
How is a reversal confirmed?
Look for negative seven-day net funding plus two or three consecutive negative daily totals, using settled payments from both legs. One negative snapshot or payment alone is insufficient. Prepare maker exits and account for partial fills. Negative funding and fees can continue while the exit is worked; monitor quantities and margin until both legs are closed.
Wait for a suitable executable basis for the planned exit. Maker fills can take time; monitor both legs and margin.
What can go wrong
Delta-neutral describes the price hedge; it does not mean risk-free. Funding can reverse, execution can cost more than expected, and the price gap between exchanges can move against the position.
The legs also live on separate venues. Downtime, a withdrawal halt or liquidation on one side can leave the other exposed. Margin must be monitored on each exchange, even when the combined position appears balanced.
What needs to stay under review?
Track settled funding, execution quality, the inter-venue price gap and margin on each leg. Include exchange availability, withdrawal restrictions and delisting notices in that review. An offsetting position elsewhere does not remove the operational risk of an individual venue.
One leg disappears
Position remains
Position is gone
Watch margin on both venues. If the short is confirmed liquidated, close the remaining long. The loss remains.
Controls & remaining risk
- Before it happensKeep a margin buffer
Monitor margin on each venue. Reduce leverage or paired size before the buffer becomes critical.
- If it happensClose the confirmed unmatched leg
If the short is confirmed gone, close the remaining long. During an outage, verify positions first; an unreachable leg may still exist.
What remainsThis stops further unhedged exposure. It does not undo liquidation losses, and venue downtime can delay action.