An 11.43% up-week paid 0.0093% funding while the short leg absorbed a 3.54% hour
Should a basis trader keep its equal perpetual short at full size to collect the week's funding, or cut it until the short's margin can survive another move like Wednesday's 3.54% hour?
The market facts are real; the decision maker is illustrative.
The week and the position
In the week of 13 February 2023, BTC rose 11.43%, from 21,782.37 to 24,271.76, after opening 2.02% above the week low of 21,351.07 and reaching 25,250 on Thursday. The range was 18.26%, with a 3.54% hour starting Wednesday 20:00 UTC, a best day of 9.57% on Wednesday and a worst day of -3.31% on Thursday. Volume ran 1.86 times the prior 12-week average, and the close sat in the upper third of the range. Perpetual funding averaged 0.0093% per eight hours, peaking at 0.0232% and never below 0.0021%. An illustrative basis trader holds spot BTC and an equal perpetual short.
Judgment
The carry is positive but thin. The week's average rate of 0.0093% per eight hours is small against the 18.26% range and the 3.54% hour the short leg absorbed, while even the week's maximum of 0.0232% per eight hours stayed modest. Keep the hedge, but size it so the short leg's margin survives a repeat of Wednesday's 3.54% hour without forced covering, and keep the spot leg liquid to post that margin. Treat the funding as incidental income rather than the reason for the trade, and accept that a fast up-week earns almost nothing on it.
What would change it
If average eight-hour funding sustains near the week's maximum of 0.0232%, the carry strengthens and the position size can be raised again. If any eight-hour rate turns negative, the trade pays to hold and the short leg should be closed.
What sets this case apart
The hedge is price-neutral, so the decision turns on whether thin positive funding justifies the margin a volatile up-week demands of the short leg.