Learn how to use funding rates as a trading strategy. Understand funding rate mechanics, cash-and-carry trades, delta-neutral farming, and how to read funding rate signals on Hyperliquid.
Funding rates are periodic payments exchanged between long and short traders on perpetual futures. They keep the perpetual price anchored to the spot price. For a full explainer, see our Funding Rates & Fees guide.
Longs pay shorts. This happens when the perp price is above spot — indicating bullish sentiment. Shorts earn yield.
Shorts pay longs. This happens when the perp price is below spot — indicating bearish sentiment. Longs earn yield.
Funding rates reveal the positioning and sentiment of the market. Learning to read them gives you an informational edge.
| Funding Rate | What It Tells You | Potential Strategy |
|---|---|---|
| Very High Positive (>0.05%/hr) | Market is extremely long-biased, euphoric | Short perps + buy spot (cash-and-carry) |
| Moderate Positive (0.01-0.05%) | Healthy bullish sentiment | Hold shorts for funding yield if delta-neutral |
| Near Zero (±0.005%) | Balanced market, no strong bias | Low funding yield — focus on directional trades |
| Moderate Negative (-0.01 to -0.05%) | Bearish sentiment, shorts dominating | Hold longs for funding yield if delta-neutral |
| Very Negative (<-0.05%/hr) | Market is extremely short-biased, panic | Long perps + short spot/stables (reverse carry) |
The cash-and-carry trade is the most popular funding rate strategy. It allows you to earn funding yield with zero directional exposure.
Find a pair with consistently high positive funding (e.g., BTC at 0.03%/hr). Check that funding has been stable for at least 24-48 hours.
Buy $10,000 worth of the asset on the spot market. You now own the actual token.
Open a $10,000 short position on the perpetual. Use low leverage (1-2x) to minimize liquidation risk.
Your spot position is unaffected by funding. Your short position earns funding payments every hour. You are market-neutral — price movements cancel out.
Close the short and sell the spot simultaneously. Your profit is the accumulated funding minus trading fees.
Earn funding on Dexly
Delta-neutral farming extends the cash-and-carry concept to a more active management style, optimizing across multiple pairs and market conditions.
Monitor funding rates across all pairs. Rotate capital to whichever pair offers the highest yield. This requires active management but can significantly boost returns.
When funding is deeply negative, reverse the trade: long the perp and hold stables (or short spot if available). Longs now earn funding from shorts.
Reinvest earned funding into larger positions. Over time, compounding can significantly amplify returns — especially during sustained high-funding periods.
If you hold spot tokens long-term, shorting the perp earns you funding while protecting against drawdowns. Your spot gains offset your short losses and vice versa.
Funding rate strategies are often called "low-risk" but they are not risk-free. Understanding the risks is critical before deploying capital.
| Risk | Description | Mitigation |
|---|---|---|
| Funding Reversal | Funding flips and you start paying instead of earning | Monitor rates closely; set alerts; unwind quickly if funding reverses |
| Liquidation | A sharp move liquidates your short before spot can be sold | Use low leverage (1-2x); keep excess margin; set alerts |
| Execution Gap | You can't enter/exit both legs at the same time | Use limit orders; enter during calm markets; avoid volatile hours |
| Trading Fees | Fees to open/close both legs eat into yield | Use limit orders for maker rebates; only trade when funding justifies costs |
| Opportunity Cost | Capital locked in a carry trade can't be used for directional trades | Allocate a fixed percentage (e.g., 30%) of capital to carry strategies |
Dexly provides real-time funding rate data for all Hyperliquid perpetuals. Monitor rates, identify opportunities, and execute both spot and perp legs from a single interface.
Perps, spot, copy & prediction markets in one fast, non-custodial app. Get Dexly on iOS & Android and start in seconds.
Risk Warning: Trading perpetual futures involves significant risk of loss. Only trade with capital you can afford to lose. Dexly is a non-custodial interface; you are responsible for your own funds and trading decisions.
Earn funding on Dexly
