0.07% per eight hours of funding against a short leg tested by a 2,200 high
Should the basis trader keep the spot-plus-perpetual-short pair at full size to collect funding averaging 0.07% per eight hours, or cut it so the short leg's margin survives another week like this one?
The market facts are real; the decision maker is illustrative.
The week and the position
In the week of 5 April 2021, ETH rose 3.65% to close at 2,151.36, in the upper third of a 13.99% range, and touched a high of 2,200.00 early on Saturday. Perpetual funding averaged 0.07% per eight hours but ranged from 0.01% to 0.2097%. An illustrative basis trader holds spot ETH and an equal short in the perpetual, collecting that funding. Wednesday fell 7.04%, the week's worst day, with a -2.28% hour. Dollar volume ran at 0.71 times the prior 12-week average.
Judgment
The funding is real, but it is paid on a short leg that must meet adverse price moves alone. From the week's open the price ran 5.99% to the high, and the funding rate itself varied more than twentyfold between 0.01% and 0.2097%, so the income cannot be booked at the average. Keep the pair, but size it so the short's margin covers a further rise beyond 2,200.00, hold the spot leg where it can be moved to that margin fast, and treat the funding as variable carry. The thinner volume, 0.71 of the 12-week average, argues against a larger size.
What would change it
If funding settles near its 0.01% weekly minimum for several weeks while price keeps pushing above 2,200.00, the carry no longer pays for the margin and the pair should be reduced. If dollar volume returns towards its 12-week average with funding holding near 0.07%, the size can be raised.
What sets this case apart
The pair is direction-neutral, so the case turns on the short leg's margin during a rising week and on a funding rate that varied twentyfold, not on price forecasting.