> For the complete documentation index, see [llms.txt](https://docs.axis.to/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.axis.to/susdx-the-rewards-vault/how-axis-earns-yield/trading-strategies/funding-rate-arbitrage.md). # Funding Rate Arbitrage Funding rate arbitrage seeks periodic payments between perpetual-futures longs and shorts while using an offsetting position to reduce broad market direction. Market-neutral arbitrage, capturing price differences while hedging out market direction, is an established institutional trading strategy, not a crypto invention. For Axis, funding rate arbitrage is **not the primary source of yield**. The funding trade has been well arbitraged across the industry over many years, so its standalone return has compressed. The desk has deep experience managing it, and it still carries real risk. Its main role at Axis is to **hedge the spot inventory** held for the bread-and-butter cross-venue and cross-currency strategies, not to serve as a primary revenue driver. ## Illustrative structure When a BTC perpetual has positive funding paid by longs to shorts, a structure can: 1. buy spot BTC; 2. short an equal notional amount of the BTC perpetual; and 3. receive funding on the short perpetual while the long spot position offsets much of the directional exposure. The two legs are equal at entry in this example. Price changes, contract mechanics, fees, and rebalancing can change the hedge ratio over time. ## Funding is not basis The **funding rate** is a periodic payment between perpetual-futures longs and shorts. The **basis** is the price difference between two related instruments, such as spot and a perpetual. A funding rate strategy can experience gains or losses from basis changes, but its intended return driver is the funding payment. A basis trade instead seeks a change or convergence in the price difference itself. ## Residual risks Positive funding can shrink or reverse. The perpetual can diverge from spot, margin requirements can rise, the short can be liquidated, either leg can fill incompletely, and a venue can restrict trading or withdrawals. Fees, borrow or collateral costs, and rebalancing can exceed funding received. Read [Delta Neutrality](/susdx-the-rewards-vault/how-axis-earns-yield/trading-strategies/delta-neutrality.md) for the hedge boundary and [Venue & Counterparty Risk](/risk/venue-counterparty-risk.md) for venue controls. --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter: ``` GET https://docs.axis.to/susdx-the-rewards-vault/how-axis-earns-yield/trading-strategies/funding-rate-arbitrage.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.