Delta-Neutral Positioning: Removing Directional Risk
We hold equal and opposite spot and perpetual positions, eliminating directional market risk while collecting funding payments.
Delta-Neutral Funding Rate Arbitrage Strategy
How we capture perpetual funding spreads and basis without directional exposure — delta-neutral positioning, cross-exchange execution and hard risk limits.
What Is Funding Rate Arbitrage?
This page sets out exactly how the fund generates return: which spreads it captures, how positions are constructed to be delta-neutral, how they are sized and unwound, and the specific conditions under which the strategy underperforms. If you are new to the mechanics, start with the funding rate arbitrage guide and the glossary.
Basis Spread Capture Between Spot and Perpetual
The difference between perpetual and spot price (the "basis") provides an additional yield layer independent of market direction.
Cross-Exchange Funding Rate Arbitrage
Funding rate discrepancies between venues are captured when both legs can be filled cleanly and within each plan's venue concentration limits.
Risk-Bounded Position Lifecycle
Drawdown controls, reserve ratios, and a configured lock-period return range keep target returns inside each plan's stated band.
How Delta-Neutral Positioning Works
A delta-neutral position holds equal and offsetting exposure to the same underlying asset — long one instrument, short another — so that a move in the asset's price produces roughly equal and opposite P&L on the two legs. In a spot-perpetual pair, the delta of the long spot leg is +1 per unit and the short perpetual leg is −1 per unit, netting to zero. The position is therefore indifferent to price direction, and its P&L is driven by the funding payment and the convergence of the basis. Delta neutrality is maintained continuously rather than set once: as the perpetual's mark price drifts and as positions are partially filled, the hedge ratio is rebalanced to keep net delta inside a defined band.
When Funding Rate Arbitrage Stops Working
Funding rates are not guaranteed to be positive. In sustained bearish conditions, perpetuals trade below spot and the funding rate inverts — shorts pay longs, and a short-perpetual position pays out rather than collects. Four conditions specifically compress or reverse returns:
Negative funding regimes. Extended periods where perpetuals trade at a discount to spot. The strategy earns nothing or loses on the funding leg.
Basis compression. As more capital chases the same spread, the funding rate itself falls. Crowding is self-defeating.
Execution slippage. The two legs must be filled close together. Slippage between them creates unhedged exposure and eats into a spread measured in basis points.
Exchange and counterparty risk. Capital sits on trading venues. Venue failure, withdrawal suspension, or a liquidation cascade on one leg is the largest tail risk in the strategy, and it is not diversifiable by holding more assets.
These are the honest constraints. Any presentation of funding arbitrage as risk-free is wrong.
Cash and Carry Arbitrage vs Funding Rate Arbitrage
Cash and carry arbitrage — buying spot and selling a dated futures contract to capture the premium — is the traditional form of this trade, and it settles when the future expires. Funding rate arbitrage applies the same logic to perpetual contracts, which never expire. Instead of a single convergence at expiry, the return arrives as a recurring funding payment, typically every eight hours. The trade-off is that the cash and carry return is known at entry, while the perpetual funding return is variable and must be earned continuously.
Risk Controls
Built-In Risk Management
Every plan operates within strict, pre-configured risk parameters. Automated controls protect capital during adverse market conditions.
Drawdown Limits
Each plan has a configured maximum drawdown alert and emergency stop level. When breached, the engine automatically reduces position size or pauses new entries.
Reserve Ratio
A configured percentage of each investment is held in reserve at all times. This undeployed capital provides a liquidity buffer and reduces leverage exposure.
Exchange Concentration Limits
Maximum exchange exposure is capped per plan. No single exchange or asset can exceed its configured allocation weight.
Liquidity Scoring
Assets are scored daily on trading volume. Low-liquidity assets are automatically excluded from selection.
Dynamic Asset Selection
The fund engine re-evaluates asset allocation daily using live market snapshots. High-volatility or low-opportunity assets are deprioritised.
Bounded Return Lifecycle
The fund engine enforces a target return ceiling and floor over each lock period. Daily P&L stays inside the plan's configured lock-period return range.
Transparency
Why You Can Trust This Fund
Every decision the fund engine makes is logged, auditable, and visible to fund administrators. Investors can inspect their daily P&L breakdown, selected assets, and risk snapshots at any time.
Real Market Data
Daily P&L is calculated using live funding rates and basis data from Binance and Kraken — not synthetic random numbers.
Itemised P&L Breakdown
Each daily return is split into funding income, basis P&L, cross-exchange component, fees, and risk adjustments.
No Guaranteed Returns
Target lock-period return and target annualised ranges are modelled on live market data. All returns are variable and depend on live market conditions. Funding rates can go negative.
Auditable Settlement
Every settlement event creates a linked transaction reference. Referral commissions are separately tracked and reconcilable.
Data Sources
B
Binance Futures
Funding rates, mark price, klines, basis data
K
Kraken Futures
Perpetual tickers, historical funding, OHLC
Daily Ingestion
Market snapshots updated once per day via automated cron
Settlement Cycle
One UTC clock. Three logged steps. Nothing is posted off-schedule.
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Capture prints
00:00 · 08:00 · 16:00 UTCLive funding and basis samples from Binance and Kraken. Three prints roll into one daily bar.
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Post daily P&L
16:10 UTCItemised returns are written from that bar — funding, basis, fees — and stored for audit.
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Credit settlement
16:20 UTCMatured plans credit principal and net returns with a linked transaction reference.
Understand the strategy before you allocate.
Read the full funding rate arbitrage guide, review how positions are sized and unwound, and see what happens in a sustained negative-funding regime — then decide whether this belongs in your portfolio.