Funding rate arbitrage is a delta-neutral strategy that profits from the periodic funding payments in perpetual futures markets. The strategy involves taking offsetting positions in the futures and spot markets to create a risk-free position, earning profit solely from the funding rate rather than price movements.

This is the classic cash and carry trade, profitable when the funding rate is positive (longs pay shorts). The steps are:

1. Identify Opportunity: Find a perpetual contract with a high positive funding rate.
2. Execute Trades: Simultaneously short the perpetual futures contract and buy the same amount of the underlying asset on the spot market.
3. Profit Mechanism: As the holder of the short position, you will receive the positive funding payments. Your long spot position perfectly hedges your short futures position, making you immune to price changes. Your profit is the funding rate you collect, minus any trading fees.

This is a reverse cash and carry trade, profitable when the funding rate is strongly negative (shorts pay longs). The steps are:

1. Identify Opportunity: Find a perpetual contract with a large negative funding rate.
2. Execute Trades: Simultaneously long the perpetual futures contract and short the same amount of the asset on the spot market. This requires borrowing the asset on margin to sell it.
3. Profit Mechanism: As the holder of the long position, you will receive the negative funding payments. However, you must pay a borrowing fee on the asset you shorted on the spot market. Your net profit is the funding rate you receive minus the borrow fee you pay. This tool automatically subtracts the borrow fee to show you the true 'Net Spread'.

Beyond the risks common to all arbitrage (like slippage and rate changes), futures-spot arbitrage has specific costs:

• Trading Fees: You will pay fees for both the futures and spot trades, both when opening and closing the positions. Typically, spot trading fees are higher than futures fees.
• Borrow Fees (for Long Futures strategy): This is a critical cost. If the borrow fee for shorting the spot asset is higher than the funding rate you receive, the trade will be unprofitable. Our tool displays this cost.
• Capital Inefficiency: Your capital is locked in the spot position for the duration of the trade, which could be used for other opportunities.
• Counterparty Risk: You are relying on the exchange to manage funding payments and your margin positions correctly.

• The 'Current' mode shows you opportunities that are profitable right now, based on the latest funding and borrow rates. It is for immediate trade execution.
• The 'Historical' mode calculates the total net profit of a strategy over a past period (e.g., 30 days). It helps you identify assets that have had a stable and consistently profitable spread over time, which are often more reliable candidates for this type of arbitrage.