๐ฐFunding Rates
Perpetual futures contracts are a type of futures contract that never expires. To enforce convergence with the index price of the underlying asset, funding rates are used to balance the market. In a perpetual futures contract, funding rates are periodic amounts of an asset paid between short and long traders who hold positions in the contract.
Funding Rates Calculation and Payment
Funding rates on GooseFX DEX are recalculated every hour. Traders will only pay or receive funding if they hold a position at one of these times. If the position is closed prior to the funding exchange, traders will not pay or receive funding.
The Formula for calculating the Funding Payment is:
Funding Amount = (Oracle Price - Orderbook Price) * min(1, Elapsed Time/ Full Funding Period)
where;
Oracle Price is the price fetched from the oracle.
Orderbook Price is the average of the best bid and best ask prices.
Elapsed Time is the time passed since the last funding time.
Full Funding Period is the total duration of the funding period. Since our Funding Payments are made on an hourly basis, the full funding period is 1 Hour.
The Importance of Funding Rates
It is important to pay attention to funding rates when trading perpetual futures contracts on GooseFX. Depending on the amount of leverage used, funding rates can have a big effect on a trader's account. In fact, depending on their leverage, a traderโs position may get liquidated if they are unable to pay for funding.
For more insights into Funding Rates, check out our blog here.
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