Finally understood how the funding rate is calculated

The replies from the experts really boil down to one sentence; they think they explained it well, but I didn't understand it. After sleeping for a day, I finally figured it out.

First of all, calculating based on leverage is correct, and calculating based on position size is also correct. Below I will explain the process and then get to the point!

First, calculate based on leverage

Taking ETH as an example, with 125x leverage, when opening 1 ETH the margin is 29.31, so the funding rate calculation is 125 * 29.31 * 0.01% = 0.366375.

In other words, different leverage results in different margins. However, when opening 1 ETH, the leverage multiplier * margin is equal to the current market price of 1 ETH.

So some people say to calculate based on position, which means holding a 1 ETH contract at the current price of 3675, the funding rate would be 3675 * 0.01% = 0.3675.

What’s the key point? It’s the percentage sign. I calculated many times and found it to be expensive because I multiplied the price by the funding rate without applying the percentage. On the calculator, after using 3675 * 0.01, you must press the % sign. Only then will it yield the correct funding rate.