Funding rate arbitrage for algo (Algorand) is a market-neutral strategy that profits from the funding payments exchanged between long and short positions in perpetual futures. Traders typically go long on spot and short on perpetual contracts to earn funding fees—without relying on price movement.

In funding rate arbitrage for algo (Algorand), traders open hedged positions in both the spot and perpetual futures markets, depending on the funding rate direction. When the funding rate is positive, a trader typically goes long in the spot market and shorts the perpetual futures, earning funding fees from long-position holders. This market-neutral strategy seeks to generate stable returns while minimizing exposure to price volatility.

Funding rate arbitrage for algo (Algorand) is generally considered lower risk than directional trading, but it is not completely risk-free. Traders may still face liquidation during extreme market volatility, slippage when trading low-liquidity pairs, interest costs from borrowing, and potential exchange-related system issues. To reduce these risks, it's important to use conservative leverage and maintain sound risk management practices.

To calculate profits, multiply your perpetual futures position size by the funding rate and adjust for the frequency of funding intervals. Then subtract any trading fees, borrowing costs, and slippage. Example formula: Annualized yield = 3 Day Cum. Funding Rate × 365/3