Perpetual contract long-term holding fee

OKX offers the most favorable long-term holding fees for perpetual contracts, ranging from 0.015% to 0.03%, making it an ideal choice for traders seeking cost-effective long-term investments.

Oct 22, 2024 at 10:12 am

Perpetual Contract Long-Term Holding Fee

Perpetual contracts are financial instruments that allow traders to speculate on the future price of an asset without having to take physical delivery of the underlying asset. They are similar to futures contracts, but they do not have a fixed expiration date. This means that traders can hold perpetual contracts for as long as they want, without having to worry about rolling them over into a new contract.

One of the key features of perpetual contracts is that they have a funding rate. The funding rate is a small fee that is paid by traders who are holding long positions (i.e., betting that the price of the asset will go up) to traders who are holding short positions (i.e., betting that the price of the asset will go down). The funding rate is designed to keep the price of the perpetual contract in line with the price of the underlying asset.

How is the funding rate calculated?

The funding rate is calculated using a formula that takes into account the difference between the price of the perpetual contract and the price of the underlying asset. The funding rate is typically positive when the price of the perpetual contract is higher than the price of the underlying asset, and it is typically negative when the price of the perpetual contract is lower than the price of the underlying asset.

Who pays the funding rate?

The funding rate is paid by traders who are holding long positions to traders who are holding short positions. The amount of the funding rate that is paid is determined by the size of the trader's position and the length of time that the trader has held the position.

Why is the funding rate important?

The funding rate is important because it helps to keep the price of the perpetual contract in line with the price of the underlying asset. If the funding rate is too high, it will discourage traders from holding long positions, which could cause the price of the perpetual contract to fall below the price of the underlying asset. Conversely, if the funding rate is too low, it will discourage traders from holding short positions, which could cause the price of the perpetual contract to rise above the price of the underlying asset.

How can I avoid paying the funding rate?

There are a few ways to avoid paying the funding rate. One way is to trade on an exchange that does not charge a funding rate. Another way is to trade in a perpetual contract that has a very low funding rate. Finally, traders can also reduce their risk of paying the funding rate by closing their positions before the funding rate is applied.

Here is a detailed ranking of exchanges based on their long-term holding fees for perpetual contracts:

It is important to note that the long-term holding fee for perpetual contracts can vary depending on the exchange and the specific contract that is being traded. Traders should always research the long-term holding fee for a specific contract before entering into a trade.