Delta-neutral, not risk-free
Funding farming hedges price but not everything — funding can flip, legs can drift, and fees bite. When positive funding is rich it’s a real carry yield. Check the raw cost on the funding calculator.
The delta-neutral funding trade
When perpetual funding runs positive, shorts get paid every 8 hours. The arbitrage: short the perp, buy the same amount spot. Price movement cancels out — spot gains offset perp losses and vice versa — while the funding payments accumulate. At a sustained 0.01%/8h you collect roughly 10.95% annualized on the notional, market-neutral.
The realistic deductions: fees to open and close both legs (0.1–0.2% total), the spot-perp basis moving against you between entry and exit, and — the big one — funding rates not staying where you found them. Hot funding mean-reverts within days; the juicy 0.05% rate you entered on often normalizes to 0.01% within the week. Annualized projections from peak rates are fiction.
The non-negotiable rule: never un-hedge one leg to "catch a move." The moment you close one side, you hold a naked leveraged position, and the strategy's entire safety premise is gone. Both legs on, both legs off, always simultaneously.