What is Funding?
Funding (also known as interest fees or rollover fees) are fees paid by the traders on the notional value of any current open position. Overbit funding intervals occur 3 times per day, every 8 hours at 01:00 UTC, 09:00 UTC and 17:00 UTC.
You will only pay or receive funding if you hold a position during one of these times. If you close your position prior to the funding period, you will not pay or receive funding.
Overbit does not profit from funding fees but operates a unique funding rate calculation methodology in order to balance demand on buy-side and sell-side liquidity. This means that Long Funding and Short Funding rates are not always inverse of each other.
The funding you will pay or receive is calculated as:
Long Funding = Notional Position Value * Long Funding Rate
Short Funding = Notional Position Value * Short Funding Rate
Funding Rate Calculations
Using Bitcoin (BTC) as an example, the Funding Rate is split into 2 elements, the Interest Rate, and the Borrowing Premium.
Funding Rate = Interest Rate + Borrowing Premium
The Interest Rate is Overbit’s rate for borrowing BTC at the current market value. The Borrowing Premium is a premium rate applied generally at times of high borrowing demand that is skewed in one direction. If most of the traders are long on BTCUSD, they will pay a Borrowing Premium. The short position holders will receive the inverse Interest Rate plus an equal distribution of the Borrowing Premium paid by the longs.
Here is an example for BTC/USD:
Daily Interest Rate = 0.1%
Daily Borrowing Premium = 0.4%
75% of BTC/USD open positions are LONG and 25% are SHORT.
Daily Long Funding Rate = 0.1% + 0.4% = 0.5%
Daily Short Funding Rate = -0.1% -1.2% = -1.3%
In the above example, 0.4% is charged to the long position holders and equally distributed to the short position holders.
Please note that Daily Funding Rates are capped at +3%/ -3%.
Positive funding rate means you will pay and a negative funding rate means you will get paid.
Interval Funding Rate Calculation
As the funding rate is charged or paid 3 times per day, you will only be charged or paid 1/3 of the daily rate.
You can see the next indicative Funding Rate on the deal ticket window of any instrument. You will also see it on the Positions table next to each open a position. You can access your ledger from the dashboard to see a history of all funding charged and paid.