Section 2
Bybit Funding Rate Explained
The funding rate on Bybit ensures that the price of perpetual futures contracts stays aligned with the underlying spot market. This funding rate helps balance the market by incentivizing traders to take positions that stabilize the price difference.
How the Funding Rate Works on Bybit
Definition: The funding rate is a periodic payment made between long and short traders based on the difference between the perpetual contract price and the spot price. On Bybit, this payment occurs every 8 hours.
Payers and Receivers:
- If the funding rate is positive, long traders pay short traders.
- If the funding rate is negative, short traders pay long traders.
The funding rate is determined by:
- Interest Rate: Cost of holding the position.
- Premium Index: Difference between futures and spot prices.
Example of How Payouts Work
If you hold a long position and the funding rate is negative, you’ll receive a payment from short traders. Conversely, if you hold a short position and the funding rate is positive, you’ll receive a payment from long traders.
How to Get Paid Through Funding Rates
- Position Selection: Choose long or short positions based on the anticipated funding rate trend.
- Hold the Position: You must hold your position at the scheduled funding time to receive or pay the rate (occurs every 8 hours).
- Strategy: Many traders hedge with both spot and futures markets to receive payouts while maintaining a risk-limited position.