Collecting 0.0707% every eight hours on a hedged BTC basis trade inside a 26.81% week
Should the basis trader keep the spot-plus-equal-perpetual-short position at full size to collect funding, or size the short leg so its margin survives a week like this one?
The market facts are real; the decision maker is illustrative.
The week and the position
In the week of 1 February 2021, BTC rose 17.23%, from 33,092.97 to 38,795.69, with a 26.81% range: the low of 32,296.16 came early Monday, the high of 40,955.51 late Saturday. Perpetual funding averaged 0.0707% per eight hours, peaking at 0.1555% and never below 0.0139%, and volume ran 1.24 times its prior 12-week average. An illustrative basis trader holds spot BTC and an equal short in the perpetual to earn that funding. The short leg lost as price climbed through the week.
Judgment
Positive funding means holders of long positions pay holders of short ones, so the short leg earns the 0.0707% average and must meet every price rise on its own margin before the accumulated carry offsets that loss. A 26.81% range with the high arriving five days after the low is exactly the sequence that stresses that margin. Size the position so the short survives a repeat of the low-to-high travel of this week, keep the spot leg liquid, and treat the 0.0707% average as carry that can shrink, not as a fixed yield. Accept a smaller position in exchange for not being forced out mid-move.
What would change it
If funding holds near its 0.1555% peak while weekly ranges compress well below 26.81%, the size limit can be relaxed. If funding falls towards or below its 0.0139% floor during rising weeks, the carry no longer pays for the margin burden and the short leg should be cut.
What sets this case apart
The hedge removes price direction risk but not margin-timing risk; the cost here is the funding week's range travelling against the short leg before the spot leg earns anything.