|
Title: Can someone explain "Funding Rate" in layman's term? Post by: Maus0728 on August 28, 2021, 10:32:34 AM Okay. I've come across a new term called "Funding Rate," and I believe I understand the premise that it determines overall trader sentiments, whether bullish or bearish.
However, I find it difficult to understand what these lines quoted below means and how the "LONG pays SHORTS and vice versa" is related to maintaining the closeness of the futures price and spot price (or index price?)? Because perpetual futures contracts never settle in the traditional sense, market operators need a mechanism to ensure that the contract and index prices would periodically converge. Funding rates serve this role. |