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Funding Rate In Crypto Futures Trading
Salam,
I’ve been reading quite a lot about Futures trading and short selling on this forum but one thing which i couldn’t find was about funding rates in crypto future trading. “ Funding rates are periodic payments either to traders that are long or short based on the difference between perpetual contract markets and spot prices. Therefore, depending on open positions, traders will either pay or receive funding.“
The funding rate is paid every 8 hours interval and once the clock hits 8 hours and the countdown is expired, immediately at that moment the rate is paid.
“The funding rate comprises two components: the interest rate and the premium.
On Binance Futures, the interest rate is fixed at 0.03% daily (0.01% per funding interval)”
From a traders perspective if i am to avoid consuming interest, should i take trades and close positions before the countdown expires, to not get paid the funding rate.
It is used to manage the differences between perpetuals and normal indexes. So does it come in the sense of RIBA and consuming interest. Please guide me accordingly. Thank you
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1 Reply
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Funding Rate In Crypto Futures Trading
updated 1 year, 2 months ago
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Since perpetual futures never expire, funding rates are used by exchanges to make adjustments between the futures price and the spot price. Funding rates are exchanged between buyers and sellers of a contract. It is not a loan transaction therefore there are no borrowers or lenders. Riba is only a concern in loan transactions.
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