PolyTerminal
Why a perp needs funding
A normal future settles on a date, and the closer that date gets, the closer its price gets to the price of the asset. A perpetual contract has no settlement date, so it needs another force. Funding is that force.
The hourly funding rate decides who pays: longs pay shorts while it is positive, and shorts pay longs while it is negative. A positive rate makes holding a long more expensive and holding a short more attractive, and a negative rate does the opposite, so the payment leans against the gap between the perp and the index and pushes the perp price back toward the index. The funding page summarizes the idea more briefly: longs pay shorts when the perp trades above the index, and shorts pay longs when it trades below. The formula below is the exact rule, because a small fixed interest term keeps the rate slightly positive even when the perp trades a little under the index.
Funding is a transfer between traders, and the protocol takes no cut. It also keeps running when the underlying market is closed, so the pull toward the index never switches off.
How the rate is built
The rate is computed in three steps.
- Sample. The exchange samples a premium index every 5 seconds. For each sample it walks the order book on each side until it has filled 1,000 quote notional (a value in the quote currency, which is pUSD), takes the volume-weighted average price on each side and compares those two prices with the index price, which the mark price guide describes. If one side of the book is too thin, that side falls back to the index price.
- Average. The samples of one 1 hour window are averaged into a mean premium.
- Convert and cap. The mean premium goes through an eight-hour formula, is divided by eight to get an hourly rate and is capped at 4% per hour.
The impact price difference and the premium index are:
IPD = max(bid_impact - Index, 0) - max(Index - ask_impact, 0)
PremiumIndex = IPD / Index
The funding page adds that a positive premium means the perp trades rich against the index, and a negative premium means it trades cheap. Then the eight-hour rate and the hourly rate are:
F_8h = scale * (mean_P + clamp(0.0001 - mean_P, +/-0.0005))
FR_hour = clamp(F_8h / 8, +/-0.04)
In plain words: when the mean premium is small, it cancels out and only the interest leg is left; beyond that, the rate follows the premium, pulled toward zero by the clamp amount. The interest leg is 0.01% per 8 hours. The clamp limits how far the interest term can adjust the result, to +/-0.05% per eight hours, before the division by eight. The scale is 1.0 for crypto, 0.5 otherwise, so markets that are not crypto pay half as much for the same premium.
The formula measures the premium against the index price. Here Polymarket's pages differ: the mark price page lists funding premium computation among the uses of the mark price, the Perps FAQ lists funding too, and a Sep 14, 2026 changelog entry says mark, funding, and margin all follow the index. This guide follows the funding page and its formula, and the mark price guide sets out the two wordings.
What the numbers look like
The table shows the hourly rate for a crypto market and for any other market, for a few values of the mean premium. The results are computed from the formula above.
| Mean premium | Hourly rate, crypto market | Hourly rate, other market |
|---|---|---|
| -0.1% | -0.00625% | -0.00313% |
| -0.03% | 0.00125% | 0.00063% |
| 0% | 0.00125% | 0.00063% |
| 0.03% | 0.00125% | 0.00063% |
| 0.1% | 0.00625% | 0.00313% |
| 1% | 0.11875% | 0.05938% |
Four things stand out:
- With no premium at all the rate is still above zero because of the interest leg, so longs pay a small amount.
- Inside a band of mean premium from -0.04% to 0.06% the clamp cancels the premium, and the rate stays at the interest leg. The second row of the table sits inside this band: the perp trades below the index there, yet the rate is still positive and longs still pay.
- The rate turns negative only when the mean premium falls below -0.05%.
- The rate is capped, so even an extreme premium cannot cost more than the cap per hour.
What it costs to hold a position
A funding payment depends on the size of your position and the hourly rate. For a rough estimate, multiply the position value by the hourly rate and by the number of hours. That multiplication is an assumption of this site: the documentation does not say at which price the position is valued for funding.
Funding adds up over time, so it matters more for positions you hold for days than for trades that last minutes. The liquidation calculator has a funding section where you can enter a rate and a holding time.
Funding changes your equity: it lowers it while you pay and raises it while you receive. A payment you owe moves your liquidation price toward the market, and it counts as part of your cost when you work out a break-even price.
Where to see funding
Funding pressure is visible before it settles: a rolling premium sample and its implied eight-hour rate (not the hourly rate that is settled) are published continuously through the exchange's public market data. Funding history is also available, and your account history lists the payments you actually paid or received.
FAQ
Who receives the funding I pay?
The traders on the other side of the market. Polymarket keeps nothing: the payment goes straight from longs to shorts or from shorts to longs, depending on the sign of the hourly rate. When the rate is positive, longs pay and shorts receive. When it is negative, shorts pay and longs receive.
How often is funding charged?
Once an hour. During the hour the exchange takes a premium sample every few seconds. At the end of the hour it averages them, applies the formula and the cap, and charges or credits each open position in that market.
Is there a limit to the funding rate?
Yes. The hourly rate is capped at 4% per hour, so a sustained gap between the perp and the index cannot produce an unlimited charge. The cap is also listed with its source and the day it was checked at the end of this page.
Does funding stop when the market is closed?
No. Funding keeps running when the underlying market is closed. Only the outside feeds used to build the index and the mark price change with the session, while the funding rules stay the same around the clock.
Sources and checks
Every rule quoted in this article comes from the registry below. Each row names the official page and the day it was compared with the text.
All 18 rules used in this article
| Rule | Value | Official source | Checked |
|---|---|---|---|
| Who pays funding, by the sign of the hourly rate | longs pay shorts while it is positive, and shorts pay longs while it is negative | docs.polymarket.com/ | |
| Funding direction in the funding page's short summary | longs pay shorts when the perp trades above the index, and shorts pay longs when it trades below | docs.polymarket.com/ | |
| Who receives funding | the protocol takes no cut | docs.polymarket.com/ | |
| Funding when the underlying market is closed | keeps running | docs.polymarket.com/ | |
| Premium index sampling | every 5 seconds | docs.polymarket.com/ | |
| Impact notional for the premium index | 1,000 quote notional | docs.polymarket.com/ | |
| Premium sample when one side of the book is thin | that side falls back to the index price | docs.polymarket.com/ | |
| Funding charge window | 1 hour | docs.polymarket.com/ | |
| Funding rate cap | 4% per hour | docs.polymarket.com/ | |
| What the sign of the premium means | a positive premium means the perp trades rich against the index, and a negative premium means it trades cheap | docs.polymarket.com/ | |
| Funding interest leg | 0.01% per 8 hours | docs.polymarket.com/ | |
| Funding interest clamp | +/-0.05% | docs.polymarket.com/ | |
| Funding scale | 1.0 for crypto, 0.5 otherwise | docs.polymarket.com/ | |
| A use of the mark price listed on the mark price page | funding premium computation | docs.polymarket.com/ | |
| A use of the mark price listed in the Perps FAQ | funding | docs.polymarket.com/ | |
| Sep 14 changelog entry on what follows the index | mark, funding, and margin all follow the index | docs.polymarket.com/ | |
| What a funding payment depends on | the size of your position and the hourly rate | docs.polymarket.com/ | |
| Funding pressure between settlements | are published continuously | docs.polymarket.com/ |
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PolyTerminal is an independent interface for Polymarket and is not operated or endorsed by Polymarket. Orders placed through PolyTerminal carry PolyTerminal’s Polymarket builder code, and PolyTerminal may charge a builder fee on top of Polymarket’s own fees. This page is educational and is not investment advice. Rules were compared with the official documentation on Oct 19, 2026; check the source before you act on a number.