$DOOD Latest funding rate: -0.0141% (settled every 1 hour). Shorts pay; annualized by simply extrapolating this period, it’s about 123.1%.
When I first started trading futures, I always thought funding fees were charges collected by the exchange. It took me a while to understand that funding is settled between long and short position holders, not paid to the exchange. Which side pays depends on whether the rate is positive or negative.
Deeply negative funding rates are sometimes common when shorts are crowded. The commonly cited risk is a short squeeze, but that’s only one possibility.
Understanding this indicator is about avoiding being misled by a single number, not using it to pinpoint market tops and bottoms.
When I first started trading futures, I always thought funding fees were charges collected by the exchange. It took me a while to understand that funding is settled between long and short position holders, not paid to the exchange. Which side pays depends on whether the rate is positive or negative.
Deeply negative funding rates are sometimes common when shorts are crowded. The commonly cited risk is a short squeeze, but that’s only one possibility.
Understanding this indicator is about avoiding being misled by a single number, not using it to pinpoint market tops and bottoms.