Strategy pattern · Carry
Crypto funding rate and basis carry, tested for liquidation and venue risk.
The crypto funding rate and basis carry strategy is a Super Algo Kit pattern card. You hold spot crypto and an equal short in the perpetual swap or a dated future. The pair collects funding or the futures basis while staying close to market-neutral. It is graded B: large carry is documented, but capturing it after fees, margin and venue risk is not settled.
strategy facts
Crypto funding and basis carry
- Family
- Carry: collecting funding or basis on a hedged pair
- Markets
- Crypto spot plus perpetual swaps or dated futures, on one venue or two
- Timeframes
- 8-hour and daily; funding intervals differ by venue and can change
- Evidence grade
- B: large carry is documented; capturing it after fees, margin and venue risk is not settled
- Status
- Literature: described in published work; untested by the kit
- Data needed
- Funding history with exact settlement times, mark and index prices, margin tiers, fee tiers and transfer rules
- Main risk
- Carry collapses when leverage unwinds, and a thin-margin short leg can be liquidated in a spike
From the kit's own card. Not investment advice.
Paper first
Test it before you trade it.
Super Algo Kit runs inside the coding agent you already use. It interviews you, writes the spec with pass marks set first, then builds, backtests and paper-tests. Real money starts only when you type the authorize command.
The plan, step by step
Tick them off as you go.
How does a crypto funding rate strategy work?
Perpetual futures never expire. To keep them near spot, longs pay shorts a periodic funding rate tied to the premium over the index. When the premium is negative, the flow reverses. Dated futures trade at a basis to spot instead.
When demand for leveraged longs is high, funding and basis rise, and a long spot, short derivative pair collects them. Research links high crypto carry to trend-chasing demand from smaller investors and scarce arbitrage capital. It also found that high carry has predicted crashes, and that price deviations have shrunk over time.
Funding and basis carry rules in plain words
This is a summary of the card's sketch. Your version declares the entry threshold and margin buffer before any test.
- Signal: annualised funding or basis against the round-trip cost of both legs plus a declared margin.
- Entry: long spot and short perpetual or future in equal notional.
- Maintenance: rebalance to stay delta-neutral, with enough margin on the short leg to survive a spike.
- Exit: when carry falls below the threshold, turns negative, or venue risk rises.
Is funding rate arbitrage risk-free?
No. The hedge keeps you close to market-neutral, but other risks remain. Carry collapses when leverage unwinds, and the research found high carry followed by crashes.
A spike can liquidate a thin-margin short leg, turning the hedge into a directional loss. A venue can halt withdrawals or fail while one leg sits there, and a stablecoin used as collateral can lose its peg.
How Super Algo Kit tests carry before any money
Pass marks are declared first, and every threshold you try is logged as a trial and checked out of sample. The backtest applies funding at each real settlement time to the positions held then, and simulates liquidation on the mark price.
Risk stress tests cover a basis collapse, a 30 percent spike against the short leg, a venue outage and a collateral depeg. The adapter must handle both legs, and paper or testnet comes before any live step.
Before you rely on it
Where it fails.
- Carry collapses when leverage unwinds; high carry has been followed by crashes.
- A spike can liquidate a thin-margin short leg and turn the hedge into a directional loss.
- A venue can halt withdrawals or fail, or a collateral stablecoin can lose its peg.
- Funding can stay negative for long stretches, and real fee tiers may be worse than assumed.
- Legging risk: the two orders fill at different times or on different venues.
FAQ
Crypto funding carry: questions.
Is crypto funding rate arbitrage risk-free?
No. A long spot, short perpetual pair stays close to market-neutral, but it still carries liquidation, venue and collateral risk. Super Algo Kit grades the pattern B because capturing the carry after fees and margin is not settled.
What is the funding rate on a perpetual future?
A perpetual future has no expiry, so the venue uses a periodic funding payment to keep it near spot. When the perpetual trades above the index, longs pay shorts; when the premium is negative, shorts pay longs. Intervals differ by venue and can change.
Why can the short leg be liquidated in a hedged trade?
The short perpetual is a leveraged position with its own margin. If that margin is thin, a fast spike can liquidate it before you rebalance, which turns the hedge into a directional loss. Super Algo Kit simulates liquidation on the mark price and stresses a 30 percent spike.
Does high funding mean a good time to enter?
Not on its own. The research the card cites found that high crypto carry has predicted crashes. The entry rule compares carry with the full round-trip cost of both legs plus a declared margin.
Can I paper trade a funding carry bot?
Yes. The card asks for paper or testnet first, with an adapter that supports both legs and cancel-on-disconnect where the venue offers it. Super Algo Kit keeps live trading off until you type the authorize command.
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- Schmeling, Schrimpf and Todorov (2023). Crypto carry. BIS Working Paper 1087.
- He, Manela, Ross and von Wachter (2022, revised 2026). Fundamentals of Perpetual Futures. arXiv 2212.06888.
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Super Algo Kit is development software. It is not investment advice, a signal service or a promise of performance. Trading involves substantial risk, including the loss of all capital you trade with.