Buy spot, short the perp
The spot long and perp short partially offset directional price exposure. What remains is carry: funding, basis, and real execution costs.
How to Earn Funding with Spot-Futures Arbitrage: Full Cash & Carry Guide
A practical guide to earning funding with a market-neutral spot-futures setup: buy spot, short the matching perpetual, collect positive funding, and manage basis, fees, liquidation buffer, and exits.
Quick actions
Educational material only, not financial advice. Funding changes, and margin plus basis risk can turn a headline APY into a loss.
Strategy
Spot long + Perp short
Goal
Funding + basis carry
Profile
Delta-neutral
In this guide
6 topics- 1When funding actually pays you
- 2How to find a pair with Spot-Futures and Funding scanners
- 3How to enter spot long + perp short without excess slippage
- 4How to calculate net APY after fees, basis, and funding flips
- 5Which risks close the trade before profit compounds
- 6A pre-entry and exit checklist you can reuse
Executive summary: earning funding with spot-futures
Only net carry matters
Do not trade headline funding. Model funding minus fees, slippage, basis drift, borrow/collateral costs, and liquidation risk.
The exit is the edge
Close when funding flips, basis worsens, liquidity thins out, margin buffer shrinks, or expected carry no longer pays for the risk.
What a good funding setup looks like
A good setup does not need the highest rate on the screen. It needs to be executable, persistent, and easy to exit.
Funding
Persistent
The rate holds across multiple intervals and does not collapse immediately after entry.
Basis
Controlled
Premium or discount is not widening against the position faster than funding accrues.
Liquidity
Deep
Your size can enter and exit without aggressive slippage or sweeping the book.
Margin
Buffered
Liquidation distance can survive sharp wicks without forcing a panic close.
Step-by-step trade workflow
The goal is to keep price exposure close to neutral and isolate the funding/carry component. The cleaner the process, the less guesswork you need.
Delta-neutral carry
- 1. Find persistent positive funding
Start with stability, not the highest number: multiple intervals, deep books, reasonable volume, and a clear funding schedule.
- 2. Check basis between spot and perp
If the perp trades rich to spot, a short perp can benefit from convergence. If basis keeps expanding against you, funding may not cover it.
- 3. Open equal-sized legs
Buy spot and short the same notional on the perpetual. Use limit orders when possible and avoid sizes that sweep the book.
- 4. Maintain margin buffer and alerts
Funding capture should not run on maximum leverage. Watch margin ratio, liquidation distance, funding forecasts, and basis widening.
- 5. Exit both legs by rule
Close when funding flips, net APY disappears, liquidity worsens, basis breaks your model, or remaining reward is smaller than the risk.
What to check in the scanner
A good funding setup starts with liquidity, persistence, and clean net yield after costs. The funding rate is only the first filter.
Filter
Why it matters
Pass condition
Funding rate
Shows potential recurring payment
Positive and persistent, not a one-candle spike
Basis / premium
Shows spot vs perp dislocation
Not widening aggressively against the short perp
Volume + depth
Shows whether entry and exit are real
Your size should not sweep the book
Funding time
Shows the next settlement window
Avoid blind entries seconds before settlement
Exchange health
Shows operational risk
Deposits, withdrawals, API, and order books are stable
Net APY formula
If the trade still looks attractive after this formula, then it is worth considering. If not, the headline funding was noise.
Gross funding = Short perp notional x Funding rate x Number of settlements
Net PnL ~= Gross funding +/- Basis move - Trading fees - Slippage - Borrow/collateral costs
Net APY ~= (Net PnL per day / Real capital used) x 365
Simple sanity-check example
- Position
- $10,000 spot long + $10,000 perp short
- Funding
- +0.02% every 8h = about $2 per settlement
- Daily gross
- 3 settlements x $2 = $6 gross funding per day
- Reality check
- If entry and exit cost $18 in fees/slippage, the first 3 days only pay back execution cost
Risks you cannot ignore
Funding flip
A positive rate can turn negative. If shorts stop receiving and start paying, the setup has changed.
Liquidation risk
A spot long does not protect the futures account from liquidation if collateral is too thin and price wicks.
Basis drift
The premium or discount between spot and perp can move against the position faster than funding offsets it.
Exit liquidity
Even a correct hedge can lose the edge if both legs must be closed through thin order books.
Pre-entry checklist
- Funding is positive and persistent, not a one-off spike.
- Spot and perp reference the same underlying asset and have enough depth.
- Entry and exit are profitable after maker/taker fees and slippage.
- Margin mode is intentional and liquidation buffer matches your risk rule.
- Exit rules are defined: funding flip, basis stop, time stop, risk stop.
- Alerts are active for funding, basis, volatility, and liquidation distance.
When to skip the trade
- Funding is high, but forecast is already falling or close to flipping.
- Basis is widening against the short perp and eating future payments.
- Books are thin and your size cannot exit without large slippage.
- You need high leverage only to make the APY look exciting.
- The exchange has deposit, withdrawal, API, or mark-price instability.
FAQ
Can you really earn from funding?
Yes, but only when funding remains positive after fees, slippage, basis risk, and capital costs. It is an active execution strategy, not passive yield.
Do you need leverage?
No. Leverage improves capital efficiency but increases liquidation risk. Start by optimizing safety buffer, not maximum APY.
How is this different from futures funding arbitrage?
The spot-futures version uses spot long as the hedge against the perp short. Perp-perp funding arbitrage runs between two futures venues and needs funding monitoring on both legs.