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Roll-over fee Meaning

A roll-over fee (also known as a Swap Rate or Funding Fee) is the interest paid or earned by a trader for holding a leveraged position overnight or past a certain settlement time. In the traditional forex market, this fee is based on the interest rate differential between the two currencies.

In the crypto market, it is most commonly seen in Perpetual Swaps as the Funding Rate.The mechanism ensures that the price of the derivative (the perpetual swap) stays closely pegged to the actual market Spot price. If the derivative price is higher than the spot price, long positions pay a fee to short positions.

This incentivizes people to sell (opening shorts), pushing the price back down toward the spot. If the derivative price is lower, shorts pay longs to incentivize buying.

This rebalancing typically happens every eight hours.For long-term leveraged traders, roll-over fees are a major operational cost. During a raging bull market, the funding rate can become so high that a trader might lose a significant portion of their capital to fees, even if the price of the asset is going up.

Conversely, savvy traders can use Delta Neutral strategies to farm these fees, holding a long spot position and a short perpetual position to collect the funding rate while remaining protected from price movements.

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Finery Markets BVI Limited (“Finery Markets”) provides software, technology infrastructure, and related Information and Communication Technology (ICT) services on a Software-as-a-Service (“SaaS”) basis. Finery Markets acts solely as a software vendor and does not operate a trading platform, does not intermediate, match, execute, clear, or settle transactions, and does not engage in any activities that would require regulatory authorisation under applicable laws.

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