Funding fees on perpetual futures explained simply — Oct 2026

Perpetual futures are contracts with no expiry date. Because they do not settle on a fixed date, their prices can drift away from the price of the underlying asset. Funding payments are one mechanism exchanges use to encourage perpetual prices to stay near the spot market.

What is a funding fee?

A funding fee is a payment exchanged between traders holding long and short perpetual positions at scheduled times. Depending on the funding rate, one side pays and the other side receives. The payment is generally transferred between traders rather than charged as an ordinary trading fee by the exchange, though exchange rules can vary.

How the funding rate affects payment

The funding rate sets the direction and size of the payment. When the rate is positive, longs typically pay shorts. This often happens when the perpetual contract trades above the spot price and demand for long positions is stronger. When the rate is negative, shorts typically pay longs, often when the perpetual trades below spot and selling pressure is stronger.

These are common patterns, not guarantees about future prices. Funding rates can change, and the exact calculation, settlement schedule, and terminology depend on the exchange.

A simple example

Suppose a trader holds a $1,000 notional long position when the funding rate is 0.01%. If the exchange applies that rate at settlement, the estimated payment is $1,000 × 0.0001 = $0.10. With a positive rate, the long would typically pay this amount to shorts. The actual amount may depend on the exchange’s calculation method and the position value at settlement.

What changes the amount?

• Position notional: A larger position generally means a larger funding payment or receipt.
• Funding rate: A higher absolute rate generally means a larger payment.
• Position direction: Whether you are long or short determines which side usually pays or receives.
• Settlement rules: Exchanges set the timing and calculation method, and may update rates at intervals.

Funding is separate from trading fees and profit or loss

Funding payments are not the same as maker or taker trading fees, which are charged when orders execute. They are also separate from unrealized or realized trading profit and loss. A profitable price move can be reduced by funding paid, while a losing position can sometimes receive funding. Consider all of these costs and returns together when assessing a trade.

What traders should check

Before opening or holding a perpetual position, review the current funding rate, the next settlement time, and the exchange’s funding calculation rules. Rates can become large or change direction, so avoid assuming that today’s rate will continue. Funding is only one factor in a trade; it does not guarantee that a perpetual price will match spot or that a position will be profitable.

In short: funding fees are scheduled payments between long and short perpetual traders. The funding rate determines who typically pays, while position size and exchange rules affect how much changes hands.