Perpetual-Style Futures are long-dated futures products that contain a funding rate component. Unlike conventional short-dated futures, Perpetual-Style Futures allow traders to hold positions for an extended period.
The funding rate is a mechanism used in Perpetual-Style Futures markets to keep the contract's price in line with the underlying asset's spot price. On an on-going basis, at intervals determined by the relevant exchange, funding payments are made between participants who have a position on the Perpetual-Style Futures market based on the funding rate:
- When the funding rate is positive, long position holders make funding payments to short position holders.
- When the funding rate is negative, short position holders make funding payments to long position holders.
Funding payments can impact your profitability. Consistently paying the funding rate may decrease your profitability and diminish your buying power.
Notwithstanding the payment intervals applicable to the exchange, your broker will debit or credit your position each business day after close-of-business.
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