What is funding rate arbitrage?
Funding rate arbitrage is a market-neutral strategy that profits from the difference in funding rates between two perpetual futures exchanges. Instead of betting on price, you collect the spread between what one exchange pays and another charges.
How it works
Perpetual futures exchanges charge or pay a funding rate every few hours to keep contract prices close to spot. When more traders are long, longs pay shorts. When more are short, shorts pay longs.
Different exchanges have different funding rates for the same asset at the same time. ETH might have a +0.01% hourly rate on Hyperliquid (longs pay shorts) and a +0.04% rate on Aster. That 0.03% gap is the arbitrage opportunity.
To capture it, you open two positions simultaneously:
- 1.Long on the exchange with the lower funding rate (you pay less)
- 2.Short on the exchange with the higher rate (you receive more)
The two positions cancel out price risk. If ETH goes up, your long profits and your short loses the same amount. If it goes down, the reverse happens. Your P&L comes entirely from the funding rate difference.
The math
The net yield you earn equals the short-side funding rate minus the long-side rate, adjusted for trading fees and slippage on entry and exit.
Example: ETH on Exchange A has a funding rate of +0.01%/hr. Exchange B has +0.05%/hr. You go long on A, short on B.
Real-world yields are lower after fees and slippage. Typical net APRs range from 30% to 200%+ depending on market conditions and which exchanges you use. ProFunding calculates the fee-adjusted net APR for every opportunity automatically.
Risks to watch
Funding rate flips
The spread can reverse — the exchange where you're short might start paying less than where you're long. You need to monitor rates and close or rotate when this happens.
Liquidation risk
A sharp price move can liquidate one leg before the other adjusts. Use conservative leverage (3-5x) and keep enough margin on both sides.
Exchange risk
DEX smart contracts can have bugs, and centralized venues can freeze withdrawals. Spread your capital across multiple exchanges rather than concentrating on one.
Slippage and fees
Entry and exit costs eat into your yield. Larger positions face more slippage on low-liquidity pairs. Use limit orders where possible and factor fees into your APR calculation.
Price divergence
Mark prices can differ between exchanges during volatility. If one exchange marks your position differently, you might face unexpected liquidations even though your net position is hedged.
Getting started
ProFunding scans 10+ perpetual DEXs every 60 seconds and ranks every pair by fee-adjusted net APR. You can backtest any opportunity against up to 30 days of historical data before committing capital.
When you find a spread worth trading, the built-in trading terminal opens both legs simultaneously — long on one exchange, short on another — with a single click. Your keys never leave your browser.
Related topics
See live opportunities
Browse real-time funding rate spreads across 10+ DEXs. Free, no login required.