Funding averaged 0.0599% per eight hours; a 3.11% hour tested the short leg
Should a basis trader keep the spot-plus-perpetual short at full size for the 0.0599% average funding, or cut size so the short's margin survives another week's 10.86% range?
The market facts are real; the decision maker is illustrative.
The week and the position
In the week of 5 April 2021, BTC rose 3.09% to close 2.67% below its 52-week high, with a 10.86% range between 55,473.00 and 61,500.00. Perpetual funding averaged 0.0599% per eight hours, peaked at 0.1486%, but bottomed at 0.013%. An illustrative basis trader holds spot BTC and an equal short in the perpetual to earn that funding. Realised volatility ran 50.1% annualised, and the largest one-hour move of 3.11% struck at 04:00 UTC on Saturday, an hour before the weekly high, while volume ran at 0.82 times the prior twelve-week average.
Judgment
Funding ranged from 0.013% to 0.1486% per eight hours, so the income is a variable carry, not a yield. Keep the trade, but size the short so its margin absorbs a 3.11% hour plus the week's 10.86% range without forced covering near the top of that range, and treat the 0.013% print as the realistic carry floor rather than the 0.0599% average.
What would change it
If eight-hour funding settles at or below the 0.013% floor for several consecutive prints, the carry no longer pays for the margin buffer and the short should be reduced. If the venue lets spot holdings count directly as margin for the short, the size limit can be relaxed.
What sets this case apart
The decision turns on the spread between the funding average and its minimum print, plus margin timing on a single hour, not on BTC's weekly direction.