Two legs, one net cash flow
Funding arbitrage pairs opposing exposures to the same underlying asset to seek a funding receipt while reducing directional price exposure. Funding is only one part of the result: add both legs' trading profit or loss, subtract execution and financing costs, and account for any liquidation or venue losses.
For the linear perpetual examples below, a positive funding rate means the long pays and the short receives; a negative rate reverses those directions. Bybit's funding fee documentation explains the position-value-times-rate calculation and settlement eligibility. Here, a plus sign means cash received by the trader, rather than a venue's accounting sign convention.
Worked example: perp versus perp
Synthetic assumptions, not measured market data: two equal $10,000 notionals on linear, dollar-settled perpetuals for the same asset. Venue A quotes +0.03% per 8 hours and venue B quotes +0.01% per 8 hours. Assume both rates become the settled rates, both positions remain eligible at aligned settlement times, and each settlement notional stays $10,000. Ignore fees, borrowing and basis changes initially.
- Short A: receive $10,000 × 0.0003 = +$3.
- Long B: pay $10,000 × 0.0001 = −$1.
- Net funding: $3 − $1 = +$2 per aligned 8-hour interval, before costs.
The spread is 0.02 percentage points, or 2 basis points, per interval. It is not $4: the positive-rate long leg pays. If both rates instead become −0.03% on A and −0.01% on B with positions unchanged, the short pays $3 and the long receives $1: net −$2. The hedge does not lock in the initial funding spread.
Spot versus perp
Replace the long perpetual with $10,000 of purchased spot and keep the $10,000 short perpetual at +0.03% per 8 hours. The short receives +$3 and the spot leg has $0 perpetual funding, leaving $3 gross under the same fixed-notional assumptions. Spot borrowing or cash financing, if used, is a separate cost. With negative funding, a long perp receives funding; the opposing short-spot leg requires available borrowed assets and incurs borrow charges. Borrow availability can disappear.
Notional is not committed capital
The perp-perp example has $20,000 of total gross notional, not a statement that $20,000 is deposited. If, solely as an illustration, each venue required $2,000 collateral, starting committed collateral would be $4,000 plus liquidity reserves and costs. That margin assumption is not a recommended leverage level or a venue requirement. Dividing $2 by $10,000 describes funding relative to one leg's notional; it does not measure return on all committed capital.
A fully paid spot purchase needs $10,000 cash plus collateral for the short perp and reserves. Borrowing that cash changes the financing costs and capital at risk. Profits at one venue are not automatically available to meet margin calls at another.
Opening and closing fees can consume many intervals
Assume an illustrative trading fee of 0.05% per fill on each perp leg, charged on $10,000 at entry and again at exit. This is an assumption, not a current exchange fee schedule. Each fill costs $5; opening two legs costs $10 and closing both costs another $10: $20 round trip. After one $2 funding interval, the result is $2 − $20 = −$18 before borrowing, slippage and price changes. Ten identical intervals would only cover those trading fees, assuming the spread and notionals stayed fixed.
Use the funding arbitrage calculator with your own fee and holding-period assumptions, and the funding fee calculator to inspect one leg. Check borrow rates separately; fees and financing vary by account, asset and venue.
Intervals and observations are different things
Hyperliquid documents hourly funding payments, even though its formula uses an 8-hour rate. Bybit documents changing quotes and settlement frequencies. Check the native interval and contract rules before comparing rates. An 8-hour-normalized quote is a comparison unit, not evidence that the venue pays once every eight hours.
- Quote: an observed rate, potentially still changing before settlement. The live arbitrage screen helps compare quotes, not guaranteed executable profits.
- Estimated accrual: a model that applies a rate over an assumed holding period. Prorating an interval does not establish entitlement to a partial payment.
- Settled payment: the actual account debit or credit when the venue applies its rules to an eligible position. Funding rate history provides rate context; it is not your personal payment ledger.
If one leg settles hourly and the other every eight hours, add the eligible payments across the same time window using each actual rate and notional. Subtracting two displayed percentages without aligning units and timestamps can misstate cash flow. Opening or closing near a boundary also introduces settlement eligibility risk.
Why the hedge does not guarantee returns
- Changing signs and financing: receipts may turn into payments while borrowing continues to accrue.
- Basis and execution: relative prices between the legs can move against the trade. Different fills, slippage, contract multipliers and changing notionals leave imperfect hedges; a perpetual has no expiry forcing convergence.
- Liquidation: each leg must meet its own margin rules. Funding deductions and adverse mark-price moves can liquidate one side before gains on the other can be transferred.
- Venue exposure: outages, withdrawal restrictions, custody losses and collateral depegs can prevent closing or moving funds. Two venues introduce two operational dependencies.
Compare measured quotes with explicit cost, capital and holding-period assumptions. Review settlement records to establish realized cash flows; neither a displayed spread nor an annualized estimate promises an outcome.
Checked against the exchanges' own documentation on 13 October 2026: Bybit funding fee calculation · Bybit funding rates and intervals · Hyperliquid funding. Not financial advice.