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What is the funding fee of OKEx perpetual contract?
The funding fee aligns the price of perpetual contracts with their underlying index by incentivizing balanced market conditions and discouraging prolonged speculation.
Oct 24, 2024 at 01:20 pm
- What is the funding fee?
The funding fee is a periodic payment made between traders who hold long and short positions on a perpetual contract. It is designed to encourage balanced market conditions and prevent excessive speculation. When the funding rate is positive, long position holders pay short position holders, and vice versa.
- How is the funding fee calculated?
The funding fee is calculated based on the difference between the perpetual contract price and the underlying index price. If the perpetual contract price is higher than the index price, the funding rate will be positive, and vice versa. The funding fee is typically paid every 8 hours.
- What is the purpose of the funding fee?
The funding fee serves several purposes:
- It discourages excessive speculation by making it more costly to hold a long or short position for an extended period.
- It helps to ensure fair market pricing by keeping the perpetual contract price aligned with the underlying index price.
- It provides a source of income for traders who hold the opposite position to the funding rate.
- How can I view the funding fee?
You can view the funding fee by visiting the perpetual contract page on OKEx and checking the Funding Rate section. The funding rate is displayed in percentage terms and is updated every 8 hours.
- How can I adjust my position based on the funding fee?
If you are holding a long position and the funding rate is positive, you may want to consider reducing your position size to avoid paying the funding fee. Conversely, if you are holding a short position and the funding rate is negative, you may want to increase your position size to benefit from the funding fee.
- What factors can affect the funding fee?
Several factors can affect the funding fee, including:
- The supply and demand for the perpetual contract.
- The volatility of the underlying index.
- The interest rate environment.
- The actions of large traders.
- Is the funding fee taxable?
The funding fee is considered income and is subject to taxation in most jurisdictions.
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