Funding

Funding is the primary mechanism to ensure Bybit’s last traded price is always anchored to the global spot price. It is similar to the interest cost of holding contracts in spot margin-trading.

On Bybit,

• "Funding" is exchanged directly between buyers and sellers every 8 hours at 16:00 UTC, 00:00 UTC and 08:00 UTC.
• When the funding rate is positive, long positions pay the short positions. Likewise, when the funding rate is negative, short positions pay the long positions.
• Traders will only pay or receive funding if they hold a position at one of these times.
• If positions are entirely closed prior to the funding exchange then traders will not pay or receive funding.

Funding is calculated as follows:

Funding = Position Value x Funding Rate

Position Value = Quantity of Contract/Mark Price

Example:

Trader A holds a long position of 10,000 BTCUSD contracts and the Mark Price is 8,000 USD at the funding time stamp with the current funding rate at 0.02%.

First, let’s calculate the Position Value:
Position Value = Quantity of Contract/Mark Price
Position Value = 10,000/8,000 = 1.25 BTC

With the Position Value, let’s calculate the Funding:
Funding = Position Value x Funding Rate
Funding = 1.25 BTC x 0.02% = 0.00025 BTC

As the funding rate is positive (0.02%), the buyer has to pay the seller. Hence, trader A has to pay a funding of 0.00025 BTC and a seller with the same quantity of contracts will receive 0.00025 BTC. If trader A closes the position before the funding time stamp, paying of funding will not be required.