What Are Funding Fees in Futures? #Futures #BTC

Funding fees are payments exchanged between long and short traders in perpetual futures contracts. These fees keep the contract price close to the underlying asset’s spot price.

• When Positive Funding Rate: Long traders pay short traders.

• When Negative Funding Rate: Short traders pay long traders.

How to Use Funding Fees Strategically

1. Monitor Funding Rates:

• Low or negative funding rates favor long positions.

• High rates favor short positions.

2. Timing Your Positions:

• Enter positions when funding rates align with your market outlook.

• Exit or reduce exposure when fees become too high.

3. Hedge Volatility:

If you expect a sideways market, you can open an opposing spot position to offset potential funding fees.