Perpetual Contract Funding Rate Farming

Learn how to use clAssets to farm funding rates on Solana's perpetual protocols.

The introduction of clARB, clOP, and clSUI to Solana presents a unique arbitrage opportunity between ARB, OP, and SUI on Solana's perpetual protocols. Let's explore how you can yield by using Clone and perpetual protocols like Drift together.

Perpetual Contract Funding Rate

In the realm of perpetual contracts, the 'funding rate' plays a pivotal role. It's a periodic payment exchanged between long and short positions, aimed at aligning the perpetual contract prices with the spot market. A positive funding rate, where longs pay shorts, indicates an excess of long positions, whereas a negative rate, where shorts pay longs, suggests a majority of shorts.

Funding Rate Farming with clAssets

This dynamic leads to a strategic maneuver known as 'funding rate farming'. For instance, if shorts are being paid a funding rate for ARB on Drift, you can establish a delta neutral position by buying clARB on Clone and shorting ARB on Drift. You benefit from the funding rate while mitigating market exposure. Conversely, if the funding rate favors longs, shorting clARB on Clone using our 'Borrow' feature and going long on ARB on Drift can yield the same effect. This approach allows traders to exploit the disparities between Clone and Drift, capitalizing on funding rate discrepancies while maintaining delta neutrality.

Improving Capital Efficiency With The Clone Pool on Solend

If you read the last section, "Clone Pool on Solend", you may know where we are going with this. Funding rate farmers can improve the efficiency of this strategy using our Solend pool. Let's walk through the example again, this time using Solend. You can go long on clARB on Clone, post the clARB as collateral on the Solend Clone Pool to borrow USDC or SOL, and use that USDC or SOL to initialize the delta-neutral perpetual position on Drift and earn the funding rate. This nearly doubles the captial efficiency of the strategy!

Do Your Own Research, Not Financial Advice.

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