Today I will share a wealth code for making money without risk. You heard me right! As long as you are not greedy, there is no risk! Let’s reveal the answer first: it is funding rate hedging arbitrage.

For example, friends who know how to play with the perpetual contract of the LOOM/USDT pair two days ago should have made a lot of money from it. Although this currency pair can no longer be arbitraged, there will definitely be similar opportunities in the future. Learn quickly.

1️⃣ What is the funding rate?

There are two ways to play the same currency in CEX: spot and contract. Due to the different trading volumes of spot and contract, the same currency may also have different prices, and premiums often occur. So at this time, the funding rate appears to repair the price difference between the spot and the contract, so that the party in the premium direction pays the other party.

This is generally the case:

- When the contract price is greater than the spot price, the funding rate is positive, and those who are long need to pay those who are short.

- When the contract price is lower than the spot price, the funding rate is negative, and short sellers need to pay long sellers.

The funding fee paid by the long/short party to the other party = total contract position x funding rate

Funding rates are generally calculated every 8 hours, at 8:00, 16:00 and 0:00 every day. Sometimes adjustments are made under special circumstances. For example, Binance’s BNX previously charged a funding rate every two hours. If there is no serious premium, the funding rate defaults to 0.01%. Please look at the picture below. The box in the upper right corner is the funding rate and the countdown to its next settlement.

2️⃣ What is the principle of making money without risk?

Take the LOOM token as an example. On October 17, the spot price of LOOM on Binance was about 0.37u, and the contract price was about 0.359u. There were too many air forces, and the difference between the spot and contract prices was 0.1u, which is a very high price difference. Moreover, as the largest exchange, Binance has a particularly large trading volume. In order to repair this price difference, Binance had to adjust LOOM's funding rate to a maximum of -3%, and change the settlement time from every 8 hours to every 4 hours, allowing the Air Force to spend more money to prevent everyone from shorting. At this time, other exchanges also have LOOM/USDT contracts. Since the depth is not as good as Binance, its funding rate only needs to be settled every 8 hours. Then there is room for arbitrage. Binance will settle the funding fee at 4:00, 12:00, and 20:00 every day, but in some places it does not. Therefore, we can open long positions on Binance before 4 o'clock, 12 o'clock, and 20 o'clock every day, and go short elsewhere. After eating up the 3% funding rate on time, we can then close the position on both platforms to achieve the purpose of risk-free arbitrage.

So the money you make is money given to you by short sellers who are willing to take the risk and continue to be short.

3️⃣ How to operate

1. Divide the funds you use for arbitrage into two parts

2. While the LOOM/USDT contract pair still maintains a high funding rate, before 4:00, 12:00, and 20:00 every day, half of the funds are used to open LOOM/USDT on Binance, which is more than double the amount, and the other half is used to open LOOM/USDT on Binance. When opening LOOM/USDT elsewhere, you are not required to open at the same price, but you must open them together within a short period of time.

Note: Orders can be opened 10-20 minutes before settlement to avoid losses caused by large price fluctuations during settlement.

3. After the hedging is opened, wait for the settlement on the hour, and you will get the 3% funding fee, which is great.

4. After settlement, first observe the price and trading volume, and then close the contract orders on both platforms once the price stabilizes, also in a short period of time.

At this point, even if the one-time funding rate hedging arbitrage is completed, after one operation, excluding the wear and tear of the contract price band and handling fees when closing the position, the profit should be around 2.5-2.9%. If the high funding rate remains high, you can arbitrage three times a day, with a profit of 7.5-8.7% in a single day, which is very impressive. Once again, the situation where arbitrage is possible is to operate before 4:00, 12:00, and 20:00 every day when the LOOM/USDT contract pair still maintains a high funding rate.

4️⃣ Is there really no risk at all?

As I said before, if you are not greedy, there will be none.

Potential risks are:

1. The exchange runs away (this is almost impossible)

2. When opening a contract for hedging, you use high leverage, which happens to cause sharp price fluctuations or pin insertion, causing one party to liquidate its position.

3. I am not proficient enough, making operational errors, pressing the wrong button, not opening hedging at the same time, etc.

5️⃣ A few more things to note:

1. This article only teaches you how to use capital rates for risk-free arbitrage, and does not encourage you to engage in contract transactions. Contracts are risky, so be cautious when entering the market.

2. For those who have not operated before, it is recommended that you try it once or twice with a small amount of money first, and then move to a large amount of money after you are familiar with it.

3. Funding rate arbitrage is not limited to the currency pairs and exchanges mentioned above. As long as there is a relatively large (more than 1%) rate difference or the exchange has different intervals, you can do arbitrage.

4. Funding rate abnormalities will end when the currency market ends and the exchange adjusts its settlement time. Therefore, arbitrage opportunities will only exist in the short term. If you want to rely on this method to make money in the long term, you need to monitor the rate conditions of each contract currency yourself. This article just provides a method and idea.

Finally, everyone is welcome to communicate and discuss in the comment area. I wish you all get rich soon!