Funding and open interest

Reading the crowd in futures

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In this lesson

Calculate funding costs and use funding and open interest to see when a trade is getting crowded.

Key takeaways

Funding: periodic payments between longs and shorts that keep perpetual prices near spot.
Positive funding means longs pay shorts (the crowd leans long); negative, the reverse.
Funding is a real cost: position × rate × number of payments.
Rising open interest shows new money; extreme funding with record open interest signals a crowded trade.

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