How Does the Polymarket Perps Funding Rate Work? (October 2026)
The Polymarket Perps funding rate keeps each perpetual anchored to its underlying’s fair value: when the perp trades above Index, longs pay shorts; when it trades below, shorts pay longs. The rate is sampled every 5 seconds, averaged over a one-hour charge window, and settled against every open position — capped at ±4% per hour.
What is the funding formula, exactly?
From the official Polymarket documentation:
mean_P = average of PremiumIndex samples over the 1-hour window
scale = 1.0 for crypto markets; 0.5 for everything else
F_8h = scale × (mean_P + clamp(0.0001 − mean_P, ±0.0005))
FR_hour = clamp(F_8h / 8, ±0.04)Three components matter:
| Component | Value | Meaning |
|---|---|---|
| Premium | sampled every 5s | How far the book drifted from Index |
| Interest leg | 0.01% per 8 hours | Fixed carry component |
| Hourly cap | ±4% | Maximum funding either way |
The ±4% cap exists for dislocation days: it stops funding from spiraling while the system keeps the incentive to converge.
How is the premium measured?
Every 5 seconds the protocol walks the order book for a fixed 1,000 quote notional on each side:
bid_impact = VWAP of top bids filling 1,000 notional
ask_impact = VWAP of top asks filling 1,000 notional
IPD = max(bid_impact − Index, 0) − max(Index − ask_impact, 0)
PremiumIndex = IPD / IndexIf one side of the book is too thin to fill the notional, that side falls back to Index and contributes zero. A positive premium means the perp is rich versus fair value; negative means cheap.
When and how is funding paid?
| Condition | Longs | Shorts |
|---|---|---|
| Rate > 0 (perp rich) | Pay | Receive |
| Rate < 0 (perp cheap) | Receive | Pay |
- Settlement happens once per hour, at the end of the charge window
- Funding is a direct trader-to-trader transfer — the protocol takes no cut
- Between settlements, rolling 5-second samples and implied rates are published through public market data, so you can watch funding pressure build in real time
- History is available via
GET /v1/info/funding
What does funding cost in practice?
Worked example — a 20x position (2,000 notional on 100 equity):
| Hourly rate | Cost per hour | Per day if it persists |
|---|---|---|
| 0.01% (calm) | 0.20 | 4.8% of equity |
| 0.10% (trend day) | 2.00 | 48% of equity |
| 4.00% (cap) | 80.00 | ~75 minutes to zero |
The lesson: on leveraged perps, funding is not a rounding error. A position can be profitable on price and still bleed to death through funding alone — this is why equity, not just PnL, is the number to watch.
Does funding run when markets are closed?
Yes. Funding runs continuously across all sessions, regardless of whether the underlying reference market is open. What changes outside regular hours is only the set of external feeds used to compute Index and Mark — the charge window, sampling, and settlement run identically around the clock.
FAQ
Q: Who pays funding — longs or shorts? A: Whoever is on the wrong side of fair value. Longs pay when the perp trades above Index; shorts pay when it trades below. The rate flips sign with the premium.
Q: How often is funding settled on Polymarket Perps? A: Once per hour at the end of each charge window. Samples are taken every 5 seconds and averaged across the hour.
Q: What is the maximum funding rate? A: ±4% per hour. The formula divides an 8-hour rate by 8, then clamps the hourly result at 4%.
Q: Why do crypto markets fund at double the rate of others? A: Crypto markets use a scale of 1.0; equities, indices, and commodities use 0.5 — halving the interest-leg and premium impact for non-crypto underlyings.
Q: Can I see funding before it settles? A: Yes — rolling 5-second premium samples and implied 8-hour rates are published continuously, and full history is available via the funding endpoint.
Sources
Disclaimer
Not financial advice. Educational purposes only. Updated October 2026.
