Kana Labs
  • Getting Started
    • Welcome to Kana Labs
  • CROSS CHAIN SWAPS
    • AMM DEX Aggregator
  • INTEGRATE KANA WIDGET
    • Kana Widget
      • Install Widget
      • Configure Widget
      • Configure Aptos Keyless
  • Web3 Aggregator SDK
    • Web3 Aggregator SDK
      • Installation
      • SameChain
      • Cross Chain Swap
      • Aggregator API's
  • SPOT TRADING PLATFORM
    • Kana Trade
      • API Docs
  • PERPETUAL FUTURES
    • Kana Perps
      • Getting Started
        • Mint Tokens on Testnet
        • Mainnet Tutorials
          • Getting Started
          • Connecting Wallet & Enabling “One Click Transaction”
          • Deposit & Withdraw Tokens
          • Placing a Market Trade Order
          • Placing a Limit Trade Order
          • Partially & Fully Closing a Live Trade Order
          • Adding Margin to an Open Position
          • Defining Take Profit & Stop Loss
      • Breaking Down Kana Perps
        • Assets Supported
        • Order Types
        • Orderbook
        • 1-Click Trading in Kana Perps
          • Delegation
        • Funding Rate
        • Leverage
        • Margin and Liquidation
        • Hedge Mode
          • Hedging a Short-Term 2-3% Price Decline
          • Dual Positioning for Flexible Profit-Taking
        • Trading Fees
      • Technical Architecture
      • API Docs
        • Installation Setup
        • Kana Perps Typescript REST API
        • Kana Perps Python Websocket API
        • Kana Perps Python REST API
        • Steps to place an order
        • Perps Contract Error Codes
        • Websocket Connection
        • Supported Markets
  • SPOT & PERP APIs
    • Trading APIs
      • Kana Trade API
      • Kana Perps API
        • Installation Setup
        • Example setup functions
        • Kana Perps Typescript REST API
        • Kana Perps Websocket API
        • Kana Perps Python Websocket API
        • Kana Perps Python REST API
        • Steps to place an order
  • PAYMASTER SERVICE
    • Kana Paymaster For Aptos and Supra
      • How it works?
      • How to Register?
      • Deposit Allowance
      • Manage Users
      • Paymaster SDK Tutorial (Typescript)
      • Paymaster API
      • Module & Function Whitelist
      • Subscription - Coming soon
      • FAQS
  • PERPETUAL OPTIONS
    • OPerps
  • Tokenomics & Governance
    • Kana Labs Tokenomics
  • REWARDS & REFERRAL PROGRAM
    • Rewards Program
      • Reward Program Season 1
      • Reward Program Season 2
      • How to Keep Track of Your Points?
      • Where to find the Missions Dashboard?
  • Referral Program
    • How to Generate Referral Link? (For the Referrer)
    • How to map your wallet to the invite IDs? (For the invited users)
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  1. PERPETUAL FUTURES
  2. Kana Perps
  3. Breaking Down Kana Perps

Funding Rate

The funding rate is a periodic payment exchanged between traders in perpetual futures markets to ensure the contract price aligns with the spot market price. Depending on whether the funding rate is positive or negative, payments flow from long to short traders or vice versa.

Funding Payment Formula:

F = (−1) × S × P × R

S: Position size (positive for long, negative for short)

P: Mark price of the asset (current fair price)

R: Funding rate (determined periodically based on market conditions)


Process Overview

The funding rate mechanism ensures price stability between perpetual contracts and spot markets by incentivising traders to balance long and short positions. Rates are typically recalculated once an hour and reflect market dynamics like demand, supply, and interest rates.

Note: Traders should monitor funding rates closely, as frequent payments can significantly impact profitability, especially for high-leverage positions.


Example:

Let us consider a scenario where the order value is $250 USDT and the current price of the selected asset - “APT-PERP”, is at US $7 per APT, then here’s how the funding rate would be calculated -

Given Parameters:

  • Order Value: $250

  • Mark Price (P): $7

  • Position Size (S):

S = Order Value / Mark Price = 250 / 7 = 35.71 APT

  • Funding Rate (R): Assume 0.02% (0.0002)

Funding Payment Calculation:

F = (−1) × S × P × R

F = (-1) × 35.71 × 7 × 0.0002

F = −0.05

Interpretation:

  • If the funding rate is positive (0.02%), long traders pay 0.05 USDT to short traders.

  • If the funding rate is negative, short traders pay long traders.

  • Payments happen once every hour

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Last updated 3 months ago