perp-funding-basis

Perpetual futures funding rate analysis and cash-carry basis trading — funding rate regimes, annualized basis signals, carry trade construction, and funding rate arbitrage between exchanges.

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Perpetual Funding Rate & Basis Trading

Overview

Analyze perpetual futures funding rates and spot-futures basis to identify carry trade opportunities, market positioning extremes, and directional sentiment signals. Funding rates are the single most important microstructure indicator in crypto derivatives — they reveal real-time leverage positioning and crowd sentiment.

Core Concepts

1. Funding Rate Mechanics

Perpetual futures have no expiry date. Instead, a funding rate is exchanged between longs and shorts every 8 hours (on most exchanges) to keep the perpetual price anchored to the spot price.

If perp price > spot price → funding rate positive → longs pay shorts
If perp price < spot price → funding rate negative → shorts pay longs

OKX funding rate schedule: payments at 00:00, 08:00, 16:00 UTC

Annualized funding rate:

# Funding rate is a per-8h DECIMAL, exactly as OKX/Binance return it
# (the API sends "0.0001" for 0.01%). 3 funding windows/day → × 3 × 365.
funding_rate_8h = 0.0001                  # 0.01% per 8h, as a decimal
annualized = funding_rate_8h * 3 * 365    # 0.1095 → 10.95% annualized

Units convention (whole skill): all code treats the funding rate as a per-8h decimal (0.0001 = 0.01%), matching the raw OKX/Binance API value. The tables below show the equivalent percentages for readability — divide a table's % by 100 to get the decimal a comparison expects (+0.05% → 0.0005).

2. Funding Rate Signal Framework

Funding Rate (8h)	Annualized	Market State	Signal
> +0.05%	> +54.75%	Extreme long crowding	Contrarian short / reduce longs
+0.02% to +0.05%	+21.9% to +54.75%	Elevated long bias	Cautious, carry trade viable
+0.005% to +0.02%	+5.5% to +21.9%	Mild long bias	Neutral to mild bullish
-0.005% to +0.005%	-5.5% to +5.5%	Balanced	Neutral
-0.02% to -0.005%	-21.9% to -5.5%	Mild short bias	Neutral to mild bearish
< -0.02%	< -21.9%	Short squeeze territory	Contrarian long / reduce shorts

Funding rate regime detection:

def funding_regime(rates_7d):
    """Classify funding rate regime from 7-day history."""
    avg = sum(rates_7d) / len(rates_7d)
    consecutive_positive = all(r > 0 for r in rates_7d[-3:])
    consecutive_negative = all(r < 0 for r in rates_7d[-3:])

    if avg > 0.0003 and consecutive_positive:       # > +0.03% per 8h
        return "overheated_long"       # High risk of long squeeze
    elif avg > 0.0001 and consecutive_positive:     # > +0.01% per 8h
        return "bullish_carry"          # Good carry trade environment
    elif avg < -0.0002 and consecutive_negative:    # < -0.02% per 8h
        return "overheated_short"       # High risk of short squeeze
    elif avg < -0.00005 and consecutive_negative:   # < -0.005% per 8h
        return "bearish_carry"          # Inverse carry trade
    else:
        return "neutral"

3. Spot-Futures Basis Analysis

Basis = Futures price - Spot price

For dated futures (quarterly), basis reflects cost-of-carry expectations:

# Annualized basis
def annualized_basis(futures_price, spot_price, days_to_expiry):
    basis_pct = (futures_price - spot_price) / spot_price
    annualized = basis_pct * (365 / days_to_expiry)
    return annualized

# Example: BTC spot $65,000, quarterly future $66,500, 45 days to expiry
# Basis: 2.31%, Annualized: 18.7%

Basis signal interpretation:

Annualized Basis	Market State	Signal
> 30%	Extreme contango, euphoric leverage	Sell basis (cash-carry), top warning
15-30%	Elevated contango, bullish leverage	Carry trade attractive
5-15%	Normal contango	Neutral, mild bullish
0-5%	Flat basis	Low conviction, wait for direction
< 0% (backwardation)	Bearish, forced selling	Contrarian long, extreme pessimism

4. Cash-Carry Arbitrage (Delta-Neutral)

Strategy: buy spot + sell perpetual futures → collect funding rate

# Cash-carry trade P&L
def carry_trade_pnl(spot_entry, funding_rates, position_size):
    """
    Delta-neutral carry: long spot + short perp
    P&L comes purely from funding rate collection.
    """
    total_funding_collected = 0
    for rate in funding_rates:
        if rate > 0:  # Longs pay shorts → we collect as short
            total_funding_collected += rate * position_size
        else:  # Shorts pay longs → we pay as short
            total_funding_collected += rate * position_size  # This is negative

    return total_funding_collected

# Example: $100,000 position, avg funding +0.015% (0.00015 decimal) per 8h, 30 days
# Revenue: 0.00015 × 3 × 30 × $100,000 = $1,350 (16.4% annualized)

Carry trade execution on OKX:

Buy spot BTC-USDT on OKX spot market
Open equal-sized short BTC-USDT-SWAP on OKX perpetual
Net delta = 0 (spot long cancels perp short)
Collect positive funding rate every 8 hours
Close both legs when funding rate turns negative or basis compresses

Risk factors:

Funding rate can flip negative → carry becomes a cost
Liquidation risk on short perp if insufficient margin (use 3-5x max leverage)
Exchange counterparty risk (keep position across 2-3 exchanges)
Basis can widen further before mean-reverting → mark-to-market loss on short leg

5. Cross-Exchange Funding Arbitrage

Different exchanges have different funding rates for the same asset. Arbitrage the spread:

# Example: BTC-USDT perpetual funding rates
exchange_rates = {          # per-8h decimals (API-native)
    "OKX": 0.00015,     # +0.015% per 8h
    "Binance": 0.00020, # +0.020% per 8h
    "Bybit": 0.00025,   # +0.025% per 8h
}

# Strategy: short on highest funding (Bybit) + long on lowest funding (OKX)
# Net carry = 0.00025 - 0.00015 = 0.00010 per 8h  (0.010%)
# Annualized: 0.00010 × 3 × 365 = 0.1095 → 10.95%
# Risk: execution cost + potential for rates to converge/flip

6. Funding Rate as Directional Indicator

Divergence signals (most powerful):

Price Action	Funding Rate	Interpretation	Signal
Price making new highs	Funding declining	Longs not chasing → distribution	Bearish divergence
Price making new lows	Funding rising (less negative)	Shorts not pressing → accumulation	Bullish divergence
Price consolidating	Funding spiking positive	Leverage building without breakout	Squeeze risk
Price consolidating	Funding deeply negative	Shorts paying heavy cost to maintain	Short squeeze imminent

Historical pattern statistics (BTC):

Funding > +0.05% for 3+ consecutive periods → 70% probability of a 5-10% correction within 7 days
Funding < -0.03% for 3+ consecutive periods → 65% probability of a 5-15% bounce within 7 days
These are contrarian signals; funding rate extremes indicate crowded positioning

7. Open Interest × Funding Rate Matrix

# Combined OI + Funding signal
def oi_funding_matrix(oi_change_24h_pct, funding_rate):
    if oi_change_24h_pct > 5 and funding_rate > 0.0003:       # funding > +0.03%
        return "leveraged_long_buildup"    # High risk, squeeze potential
    elif oi_change_24h_pct > 5 and funding_rate < -0.0001:    # funding < -0.01%
        return "leveraged_short_buildup"   # Short squeeze potential
    elif oi_change_24h_pct < -5 and funding_rate > 0:
        return "long_liquidation"          # Forced long closing
    elif oi_change_24h_pct < -5 and funding_rate < 0:
        return "short_liquidation"         # Forced short closing
    elif abs(oi_change_24h_pct) < 2 and abs(funding_rate) < 0.00005:  # |funding| < 0.005%
        return "quiet_market"              # Low conviction, wait
    else:
        return "mixed"

Data Access

Via OKX API

# Funding rate history
# GET /api/v5/public/funding-rate-history?instId=BTC-USDT-SWAP

# Current funding rate
# GET /api/v5/public/funding-rate?instId=BTC-USDT-SWAP

# Open interest
# GET /api/v5/public/open-interest?instType=SWAP&instId=BTC-USDT-SWAP

Use load_skill("okx-market") for OKX data retrieval patterns.

Key Metrics to Track

Metric	Source	Frequency	Alert Threshold
BTC funding rate (8h)	OKX / Binance	Every 8h	> +0.05% or < -0.03%
ETH funding rate (8h)	OKX / Binance	Every 8h	> +0.05% or < -0.03%
Annualized basis (quarterly)	OKX	Continuous	> 30% or < 0%
BTC open interest change	OKX	Hourly	> ±5% in 24h
Cross-exchange funding spread	Multi-exchange	Every 8h	Spread > 0.02%

Output Format

## Funding Rate & Basis Analysis — [Asset]

### Current Funding Rates
| Exchange | 8h Rate | Annualized | Regime |
|----------|---------|------------|--------|
| OKX | +0.015% | +16.4% | bullish_carry |
| Binance | +0.020% | +21.9% | bullish_carry |

### Basis Structure
- **Spot price**: $XX,XXX
- **Perp price**: $XX,XXX (premium: X.XX%)
- **Quarterly futures**: $XX,XXX (annualized basis: X.X%)
- **Basis regime**: [contango / flat / backwardation]

### Funding History (7-day)
- **Average**: +X.XXX%
- **Trend**: [rising / stable / declining]
- **Consecutive direction**: [X periods positive/negative]

### Open Interest
- **Current OI**: $X.XB
- **24h change**: [+/-X%]
- **OI × Funding signal**: [leveraged_long_buildup / quiet / etc.]

### Carry Trade Opportunity
- **Best carry**: [short on Exchange X, long spot]
- **Expected annualized yield**: X.X%
- **Risk**: [funding flip probability, liquidation distance]

### Directional Signal
- **Funding regime**: [overheated / bullish / neutral / bearish / oversold]
- **Divergence**: [none / bullish / bearish]
- **Confidence**: [high / medium / low]

Notes

Funding rates are exchange-specific; always compare across OKX, Binance, and Bybit for the full picture
Extremely high funding rates are a cost for longs, not a bullish signal — they indicate overcrowded positioning
Cash-carry trades have execution risk: slippage on entry/exit, funding rate flipping, and exchange downtime during volatility
Basis and funding rate signals work best when combined with on-chain data (MVRV, exchange flows)
This framework is for research purposes only and does not constitute investment advice

Repository: HKUDS/Vibe-Trading
Path: agent/src/skills/perp-funding-basis/SKILL.md
Commit: 8643fcd

Last updated: 2 days ago
First committed: 14 days ago

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