With high funding rates, how should traders respond to “wear and tear”?
Today I chatted with a friend about the outlook for the crude oil market. Most people still believe that the logic for shorting remains valid on the bigger-picture direction. The Federal Reserve’s rate-hiking cycle is basically near its peak, and the market’s gradual digestion of high interest rates is also bringing oil prices back to more rational levels. Going forward, the key focus will mainly be on the situation in the Middle East and the level of navigation openness through the Strait of Hormuz. If geopolitical risk eases somewhat and shipping routes gradually recover, then even if oil prices pull back toward around $75, there is still fundamental support.
The direction may be right, but the biggest pain point is your position cost.
After算了一下 my current holdings plus planned additional buys, the “wear and tear” from the funding rate already accounts for nearly 30% of my total capital投入. Looking at it, it’s really quite painful. For traders shorting traditional commodities or perpetual contracts, the biggest hidden killer of a long position is often not volatility—it’s the funding rate that keeps being deducted over time.
When it comes to reducing the wear and tear caused by funding rates and trading costs, although there’s currently no “magic cure” in the market that can completely eliminate it, there are some approaches and tools that can help us lower holding costs:
1. Offset costs with margin account earnings:
Choose platforms that support margin wealth management / interest-bearing collateral (e.g., some emerging brokers or aggregation platforms like BiyaPay). Use idle or placed-on-order margin to earn roughly 5% annualized interest. While this won’t fully cover high funding rates, it can at least provide some interest subsidy, effectively reducing the cost of holding.
2. Fine-tune rate management (leveraging zero-fee policies):
During the build-up and rebalancing stages, use limit orders (Maker) as much as possible to get filled. Some platforms (such as BiyaPay’s contract/spot Maker 0% fee, as well as certain TradFi trading pairs with Maker/Taker zero-fee policies) can significantly reduce the trading friction cost caused by frequent repositioning.
3. Pay attention to the platform’s onboarding support for new users:
Many platforms have recently offered demo positions or bonus subsidies for new users (for example, rewards/excellent体验金 when充值 meets a target). These extra benefits can also serve as a supplemental liquidity pool and provide a thicker safety buffer when testing strategies in the early stage or establishing an initial position.
Today I chatted with a friend about the outlook for the crude oil market. Most people still believe that the logic for shorting remains valid on the bigger-picture direction. The Federal Reserve’s rate-hiking cycle is basically near its peak, and the market’s gradual digestion of high interest rates is also bringing oil prices back to more rational levels. Going forward, the key focus will mainly be on the situation in the Middle East and the level of navigation openness through the Strait of Hormuz. If geopolitical risk eases somewhat and shipping routes gradually recover, then even if oil prices pull back toward around $75, there is still fundamental support.
The direction may be right, but the biggest pain point is your position cost.
After算了一下 my current holdings plus planned additional buys, the “wear and tear” from the funding rate already accounts for nearly 30% of my total capital投入. Looking at it, it’s really quite painful. For traders shorting traditional commodities or perpetual contracts, the biggest hidden killer of a long position is often not volatility—it’s the funding rate that keeps being deducted over time.
When it comes to reducing the wear and tear caused by funding rates and trading costs, although there’s currently no “magic cure” in the market that can completely eliminate it, there are some approaches and tools that can help us lower holding costs:
1. Offset costs with margin account earnings:
Choose platforms that support margin wealth management / interest-bearing collateral (e.g., some emerging brokers or aggregation platforms like BiyaPay). Use idle or placed-on-order margin to earn roughly 5% annualized interest. While this won’t fully cover high funding rates, it can at least provide some interest subsidy, effectively reducing the cost of holding.
2. Fine-tune rate management (leveraging zero-fee policies):
During the build-up and rebalancing stages, use limit orders (Maker) as much as possible to get filled. Some platforms (such as BiyaPay’s contract/spot Maker 0% fee, as well as certain TradFi trading pairs with Maker/Taker zero-fee policies) can significantly reduce the trading friction cost caused by frequent repositioning.
3. Pay attention to the platform’s onboarding support for new users:
Many platforms have recently offered demo positions or bonus subsidies for new users (for example, rewards/excellent体验金 when充值 meets a target). These extra benefits can also serve as a supplemental liquidity pool and provide a thicker safety buffer when testing strategies in the early stage or establishing an initial position.