What is a funding rate? How perpetual futures funding is calculated and paid

Funding rate in one paragraph

A funding rate is the percentage of a position’s notional value that one side of a perpetual futures contract pays the other at each funding timestamp. A perpetual future has no expiry date, so nothing forces its price back to the price of the asset it tracks. The payment does that job by making the crowded side of the market more expensive to hold. Flipster’s perpetual swaps guide says the exchange of funding is “designed to promote the convergence” of the contract’s market price and the index price of the underlying asset.

Five terms recur in this guide:

• Perpetual future (also called a perpetual swap): a futures contract without an expiry date.
• Index price: the reference price of the underlying asset. Flipster describes its index as an average of prices from major exchanges, updated per second.
• Premium: the gap between the contract price and the index price, as a percentage of the index.
• Notional value: the full size of the position, quantity times price, whatever margin supports it.
• Funding timestamp: the moment the payment is exchanged. Only positions open at that moment take part.

This guide is part of the Flipster Learn guides to perpetual futures. The glossary has short definitions of premium, funding cap and mark price.

Why perpetual futures need a funding rate

A perpetual future needs a funding rate because it never expires. A dated future is settled against the spot price on its expiry day, so its price has to meet spot by then. A perpetual has no such day. In “Fundamentals of Perpetual Futures” (arXiv 2212.06888, submitted on 13 December 2022 and last revised on 17 September 2026), Songrun He, Asaf Manela, Omri Ross and Victor von Wachter write that perpetuals “are not guaranteed to converge to the spot price”, and that long investors therefore periodically pay shorts a rate proportional to the gap between the perpetual and spot prices.

The mechanism works through cost. When the contract trades above the index, a long position pays at every timestamp and a short position receives. Some traders respond by closing longs or opening shorts, and that selling pulls the contract back toward the index. When the contract trades below the index, the incentive runs the other way. Nobody is obliged to act, so a gap can persist. Funding only makes it expensive to keep.

Who pays whom: positive and negative funding

The sign of the rate decides the direction of the payment: a positive rate moves money from longs to shorts, a negative rate from shorts to longs. Flipster’s perpetual swaps guide, read on 11 October 2026, states both cases and adds that the platform levies no additional cost on the exchange.

Positive funding rate

A positive funding rate means long positions pay short positions. It appears when the contract has been trading above its index price, which happens when demand to be long at that price outweighs demand to be short. If you are long, a positive rate is a recurring cost. If you are short, it is a recurring credit.

Negative funding rate

A negative funding rate means short positions pay long positions. It appears when the contract has been trading below its index price. A negative rate tells you how the market was positioned over the last interval. It does not tell you where the price goes next: the rate can stay negative while the price keeps falling, and it can turn positive at the next timestamp. Read it as a cost or a credit for your side, not as a signal.

Funding is paid between traders, not to the exchange.

The funding rate formula

Most venues that publish a formula build the rate from two parts, a premium index and an interest rate component, and then limit the result. The form below appears, with small differences, in the help pages of OKX and Bybit and in the Hyperliquid documentation, all read on 11 October 2026.

Funding rate = average premium index + clamp(interest rate - average premium index, -0.05%, +0.05%)
then limited to the contract’s cap and floor

Each venue sets its own parameters, and this formula is not presented here as Flipster’s. Flipster’s own description is in its help-centre article “Funding Fees Explained”, which the perpetual swaps guide links to.

Interest rate component

The interest rate component is a small fixed number, not a market rate. Bybit states 0.03% per day, which is 0.01% per 8-hour funding interval. OKX states 0.01%, fixed. Hyperliquid’s documentation uses 0.01% every 8 hours and describes it as the difference between the cost of borrowing US dollars and the cost of borrowing spot crypto. Flipster’s BTCUSDT.PERP page lists a base interest rate (8H) of 0.01%.

Premium index

The premium index measures how far the contract trades from its index price. OKX and Bybit publish the same definition: [max(0, impact bid price - index price) - max(0, index price - impact ask price)] divided by the index price, where an impact price is the average price at which a set notional amount would be filled on that side of the order book. The value is sampled through the interval and averaged. OKX and Bybit give later minutes more weight; Hyperliquid samples every 5 seconds and averages over the hour.

Clamp and cap

Two limits act on the result. In the published form above, the clamp holds the term (interest rate - premium) within 0.05% either way. With a 0.01% interest rate, any average premium between -0.04% and +0.06% therefore cancels out and the rate equals the interest rate component: 0.01%. Outside that band the rate follows the premium, shifted by 0.05%. An average premium of 0.20% gives 0.20% - 0.05% = 0.15%, and one of -0.20% gives -0.20% + 0.05% = -0.15%.

The cap then limits the final number. Flipster’s contract pages list a funding cap of 0.3000% for BTCUSDT.PERP and 0.5000% for XAUUSDT.PERP. Hyperliquid caps funding at 4% per hour, and Bybit derives its upper and lower limits from the contract’s margin rates.

Funding terms on Flipster contracts

Funding terms on Flipster are set per contract, and two contracts can differ in interval, base rate and cap. The table compares the terms printed on two contract specification pages on 11 October 2026.

Three things follow from the table. The gold contract funds twice as often, so a rate of the same size is charged six times a day instead of three. Its cap per interval is higher. And its base interest rate is listed as 0.00%, against 0.01% for the bitcoin contract.

Why zero? This part is our explanation, not a statement by Flipster. The interest component is a convention that stands for the difference in borrowing costs between the two sides of a pair, and a venue can set it to zero for a given contract. Bybit’s help page says it does so for specific pairs.

Product details are on the pages for perpetual futures contract rules and fees on Flipster and for gold and stock perpetuals and their funding schedule.

How to calculate a funding payment

A funding payment equals the position’s notional value multiplied by the funding rate at the timestamp. Margin does not enter the formula.

Funding payment = position notional value x funding rate

OKX’s help page writes the same thing as funding fee = position value x funding rate. The two examples below use round numbers. They are illustrations, not quotes, and real rates change at every interval.

Worked example: a long position

The margin line is there to show that it changes nothing: the same 10,000 USDT position backed by 5,000 USDT of margin pays the same 1 USDT. What changes is the weight of the payment. At the cap, 30 USDT is 0.30% of the notional but 1.5% of a 2,000 USDT margin.

You pay on notional, not on margin.

Worked example: a short position when funding is negative

With a negative rate the short pays and the long receives. A trader who is short to hedge a spot holding carries this cost for as long as the rate stays below zero.

For scale, compare funding with trading fees. Flipster’s entry-tier taker fee is 0.06% (fee guide read on 11 October 2026), which is 6 USDT on a 10,000 USDT order. At 0.01% per 8 hours, funding on the same notional matches that fee after six intervals, or two days. A fee is charged once per trade. Funding recurs for as long as the position stays open. The fee schedule lists the maker and taker fees, which are separate from funding.

Annualised equivalent, and why funding is not a yield

Multiplying a funding rate out to a year gives a comparison figure, not a rate anyone has undertaken to pay. At 0.01% per 8 hours the arithmetic is 0.01% x 3 x 365 = 10.95% of notional a year. The correct label for that number is: annualised equivalent (rate x intervals per day x 365), not a yield.

• The rate is reset every interval and can change sign, so a figure built from today’s rate describes no future period.
• The counterpart is another trader, not the exchange. Nobody has agreed to keep paying.
• Receiving funding requires holding a leveraged position, which has its own trading fees, margin requirement and liquidation risk.

“Funding rate arbitrage” is the name for holding a spot asset against an offsetting short perpetual, or the reverse, so that price moves cancel and the funding payments remain. It is the activity that pulls the two prices together: the He, Manela, Ross and von Wachter paper derives no-arbitrage prices for frictionless markets and bounds for markets with trading costs. It carries risk. The rate can turn against the position, the short leg can be liquidated in a sharp rally even though the spot holding has gained, and each leg depends on the venue that holds it. This guide gives no instructions for it.

How funding affects margin and liquidation

Funding changes the margin behind a position, so repeated payments move a position toward its liquidation price even when the market price stands still. OKX’s help page describes this on its own platform: the fee is deducted from the paying user’s position, and the lower equity “may trigger position size reduction or liquidation”. How Flipster books funding in isolated and cross margin is not stated on the Flipster pages read for this guide.

The formula is in the guide to how a liquidation price is calculated.

How to check funding before you open a position

Check four things on the contract’s own page before you open a position: the interval, the current rate and its sign, the cap and the next timestamp. We opened Flipster’s contract specification page for BTCUSDT.PERP on 11 October 2026 to see where each one is.

The page starts with an overview sentence: the contract is priced on the BTC USDT index, one contract is worth 1 BTC, it is quoted and settled in USDT and it does not expire. Below it is a table headed “Contract Specification”. After the expiry row, its next three rows are the funding terms: “Base Interest Rate (8H)”, “Funding Time” and “Funding Cap”. On that day they read 0.01%, every 8 hours at 00:00, 08:00 and 16:00 UTC, and 0.3000%. Further down, an “Index Price” section lists the exchanges whose prices make up the index.

A strip above the table has fields for the index price, the mark price and the funding rate. In the page source those fields are empty. They are filled with live values in the browser, so the current rate has to be read on the loaded page or on the trading screen, not in a saved copy.

1. How often does this contract fund? Intervals of 8 hours and of 4 hours are both in use on Flipster.
2. What is the current rate, and which side pays? A positive rate is a cost for longs, a negative rate a cost for shorts.
3. What is the cap? It is the most that can be charged in one interval: 0.3000% on BTCUSDT.PERP.
4. When is the next funding timestamp? A position open at that moment takes part. One closed before it does not.

Funding rates across venues

Funding parameters differ from venue to venue, so the same asset can carry different rates at the same moment. The table lists the published parameters of four venues as read on 11 October 2026. It compares rules, not costs, and it ranks nothing.

Two details matter when you compare. A shorter interval does not by itself mean a higher cost: OKX divides its 8-hour rate by the number of cycles that fit into 8 hours, and Hyperliquid pays one eighth of the 8-hour rate each hour. And a published cap says how bad one interval can get, not what the rate usually is.

Common mistakes

Four mistakes account for most surprises with funding, and each comes from treating it as a detail.

• Ignoring funding on long holds. A cost of 1 USDT per interval becomes 90 USDT over 30 days. Over weeks, funding can exceed the fees paid to open and close.
• Reading a negative rate as a buy signal. A negative rate records past positioning. It predicts nothing about the next price move.
• Forgetting that funding is charged on notional. The payment scales with position size, not with the margin posted, so the same rate takes a larger share of a thinly margined position.
• Assuming every contract funds every 8 hours. XAUUSDT.PERP on Flipster funds every 4 hours, and Hyperliquid pays hourly.

Funding rate FAQ

What is a good funding rate?

There is no good or bad funding rate, only a cost or a credit for the side you hold. A positive rate is a cost for a long position and a credit for a short one, and a negative rate reverses that. What matters is the size of the rate against the time you plan to hold: on BTCUSDT.PERP the base interest rate is 0.01% per 8 hours and the cap is 0.3000%.

What does a negative funding rate mean?

A negative funding rate means the contract has been trading below its index price, so short positions pay long positions at the next funding timestamp. It describes how the market was positioned during the last interval. It is not a forecast of the price, and the rate can turn positive again at the following interval.

How often is funding paid?

Funding is paid at fixed intervals set for each contract, and the interval is not the same everywhere. On Flipster, BTCUSDT.PERP funds every 8 hours at 00:00, 08:00 and 16:00 UTC and XAUUSDT.PERP funds every 4 hours, according to the contract pages read on 11 October 2026. Hyperliquid’s documentation describes hourly payments. Check the contract’s own page before you trade.

Does Flipster keep the funding fee?

No. Flipster’s perpetual swaps guide says traders with long and short positions exchange funding fees with each other “with no additional costs levied by the platform”. Funding is separate from the trading fees that Flipster charges on each trade, which at the entry tier are 0.02% for makers and 0.06% for takers in the fee guide read on 11 October 2026.

Do I pay funding if I close before the funding time?

No. Flipster’s guide says funding applies only to users holding positions at the funding timestamp, so a position closed before that moment neither pays nor receives funding for the interval. A position opened minutes before the timestamp is included. Do not cut it to the last seconds: OKX’s help page notes that its own fee assessment can take up to a minute.

Is the funding rate the same on every exchange?

No. Each venue sets its own formula inputs, interval and limits, and each contract has its own order book, so rates differ between venues for the same asset at the same time. Bybit and OKX publish an interest component of 0.01% per 8 hours with a 0.05% clamp, Hyperliquid pays hourly with a cap of 4% per hour, and Flipster caps BTCUSDT.PERP at 0.3000% per interval.

Sources

1. Flipster guide, section 3, “Perpetual Swaps” (funding fee and funding period): flipster.io/support/guide/perpetual-swaps, accessed 2026-10-11.
2. Flipster trading rules, contract specifications for BTCUSDT.PERP: flipster.io/support/trading-rules/contract/BTCUSDT.PERP, accessed 2026-10-11.
3. Flipster trading rules, contract specifications for XAUUSDT.PERP: flipster.io/support/trading-rules/contract/XAUUSDT.PERP, accessed 2026-10-11.
4. Flipster guide, section 7, “Fees” (trading fees by VIP tier): flipster.io/support/guide/fees, accessed 2026-10-11.
5. He, S., Manela, A., Ross, O. and von Wachter, V., “Fundamentals of Perpetual Futures”, version 7 of 17 September 2026: arXiv 2212.06888 abstract page, accessed 2026-10-11.
6. OKX help, “Perpetual funding fee mechanism”, updated 27 August 2026: OKX funding fee mechanism article, accessed 2026-10-11.
7. Bybit help centre, “Introduction to Funding Rate”, updated 22 May 2026: Bybit introduction to funding rate, accessed 2026-10-11.
8. Hyperliquid documentation, “Funding”: Hyperliquid funding documentation, accessed 2026-10-11.