Here are the top 5 arbitrage opportunities based on the cumulative funding rate of Binance Futures over the past 3 days. Assuming an investment of 10,000 USDT, it is possible to earn 3% in 3 days, assuming an annualized rate of return (APR) of 752.21%. Isn't it tempting?
As Warren Buffett said, "Risk comes from not knowing what you are doing." So today, let's learn how to use contract funding rates to make a profit.
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Why is the funding rate important?
The funding rate was invented to keep the perpetual contract price consistent with the spot price of the underlying asset.
Traditional futures contracts have a delivery date, and as the delivery date approaches, their price will naturally converge with the spot price. However, perpetual contracts have no expiration date, so the funding rate mechanism is introduced to ensure that the contract price remains close to the spot price over time.
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🌟 Funding Rate Detailed Explanation 🌟
Funding rates are payments regularly exchanged between long (buyers) and short (sellers) traders in the perpetual swap market. These rates can be positive or negative, depending on the relationship between the perpetual swap price and the spot price.
Essentially, a positive funding rate means long positions pay short positions, while a negative funding rate means short positions pay long positions. This mechanism incentivizes traders to open positions in opposite directions, thus helping to recalibrate prices.
Learn more 👉 https://buff.ly/472DRbE
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In-depth understanding: What are interest rate and premium indexes?
In cryptocurrency trading, funding rates are made up of two main components: the interest rate and the premium index.
1️⃣ Interest rate: reflects the cost of capital and usually represents the difference in borrowing costs between the base currency (such as USD) and the quote currency (such as BTC). Interest rates are usually small and stable.
2️⃣ Premium Index: Measures the difference between the perpetual contract price and the spot price of the underlying asset. A positive premium indicates strong buying interest (contract price is higher than spot price), while a negative premium indicates strong selling interest (contract price is lower than spot price).
By understanding these two key factors, you can better understand the dynamics of funding rates and make more informed decisions in your trading.
Learn more 👉https://www.binance.com/zh-CN/futures/funding-history/perpetual/real-time-funding-rate
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How is the funding rate calculated?
Funding rates are calculated based on an interest rate and premium index, although the exact formula may vary from exchange to exchange. It is important to understand the specific calculation method of the exchange you are using.
Binance Futures Funding Rates:
Binance Futures uses a fixed daily interest rate of 0.03%, which is divided into three funding rate payments every 8 hours, each of 0.01%. You can view the current funding rate and the countdown to the next payment at the top of the Binance Futures trading interface.
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Unlock the secrets of funding rates and increase your trading profits
Funding rates can be a valuable tool for traders to optimize their strategies and maximize profits. Here are some tips and tricks to help you understand and utilize funding rates effectively:
1️⃣Always pay attention to the funding rate of the contract you are trading
🔸On the Binance Futures trading interface, you can see the current funding rate for each perpetual contract. This information is updated in real time.
2️⃣ Seize arbitrage opportunities on Binance
🔸Binance Futures Funding Rate Arbitrage Robot: Binance’s recently launched one-click arbitrage product.
🔸Binance Futures Funding Rate Arbitrage Portfolio: Helps you realize profits easily.
*Select arbitrage portfolio: Arbitrage portfolio can be sorted by annualized rate of return (APR).
*Build an arbitrage portfolio
*Cumulative funding rate > 0: Buy spot and sell contract
*Cumulative Funding Rate < 0: Buy contracts and sell spot
*Get funding at the end of the funding rate cycle
Through these steps, you can better utilize the funding rate to optimize your trading strategy and thus increase your trading profits.
Start trading 👉https://www.binance.com/en-US/futures/funding-history/perpetual/arbitrage-data
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Ready to earn while you learn?
Study this week’s content, complete the test, and have a chance to win a 20 USDT reward!
Start testing 👉https://www.binance.com/en/survey/5908287de3614ec48ec43a2708c66abe
🤔Want to reveal the long-short ratio in the next Contract Friday? Or, if you have other contract-related topics you want to learn more about, please let us know in the comments 👇
