Funding Rate

Funding is a periodic transfer between long and short holders of a perpetual future. It is designed to help keep the contract near its spot reference without a dated expiry:

funding payment = position notional × funding rate

On Bybit, a positive rate means longs pay shorts and a negative rate means shorts pay longs. The exchange's funding explanation uses position value multiplied by the funding rate. Other contracts and venues can have different calculation inputs, caps, and settlement schedules, so the venue's specification controls.

At a +0.01% funding event, a $10,000 long pays $1 and an equivalent short receives $1, before any venue-specific adjustments. Repeating that arithmetic with a fixed rate can illustrate carry, but it is not a forecast: rates change, and Bybit's funding-history documentation notes that intervals can differ by symbol.

Why it matters to strategies

Funding changes net PnL whenever a position crosses a settlement time. It can also be used as a market feature, but a positive or extreme observation does not by itself predict a reversal or squeeze. A delta-hedged funding trade still has basis, execution, liquidation, counterparty, and changing-rate risk; the label “market neutral” does not remove those risks.

A common misconception is that perpetual funding is always paid every eight hours. Eight hours is common, but the interval is a contract property and can change. Backtests should use the actual timestamps and rates for the tested market where those data are available.

On AlphaProve

AlphaProve exposes the most recently observed rate as ctx.latest_funding_rate and can debit or credit funding events in simulated positions. A strategy can therefore use funding as an input independently of whether the run includes funding cash flows; the run methodology should state both choices. The backtesting definition explains why cost assumptions must accompany a reported return.