perp-arb

Funding rate arbitrage project

Overview

Perpetual futures platforms typically use funding rates keep the price of the future closely aligned with the true (oracle) price.

If the price of the perpetual future is 5% higher than the oracle price then the platform will incentivise users to go short to keep the price in check (and vice versa if the perpetual future price is lower than the oracle price). This leads to an intentional funding rate arbitrage opportunity.

Strategy

1. Identify the SynFutures perpetual future price F_p ✅
2. Identify the oracle price of the pair (initially using a liquid DEX price as a proxy for this) O_p ✅
3. Obtain the signal strength F_p / O_p (which must be greater than some value to justify arbitrage) ✅
4. Purchase the asset, and add it to the perpetual futures platform so that it can be used for trading. ❌
5. Go short on the perptual future with 1x leverage so that the trade is delta neutral. The margin used will be the same as the short size. ❌
6. Exit when F_p <= O_p. ❌
7. Remove the margin (and potential profit) from the perpetual futures platform and swap this back to some low risk asset e.g., USDC. ❌

Initially this will only consider going short on the perpetual future for the ease of keeping the trade delta neutral (with spot margin acting as a hedge)

Tax Implications

Having a highly volatile asset as margin is less than ideal because any price increases will incur capital gains that get cancelled out by the short position. Ideally the margin would be relatively stable. This means there is capital gains risk, in addition to the tax which would be paid on funding rate earnings (classified as income tax).

Tests

To run tests you must have pytest installed.

Run pytest from the project root.

Trade Flow

Dev account address: 0x7D56feee99c588A3FFeA77e9d39E7afc31Af6135

To work out how to interact with SynFutures I used a dev account to enter and exit a trade.

1. Deposit 0.0025 ETH margin

   • Tx: 0x7e904f94e8e0f0a8b1123a4c5d6e7f8192a3bc4d5e6f7a8b9c0d1e2f3a4b5c6d
   • Contract: SynFuturesGate: 0x208B443983D8BcC8578e9D86Db23FbA547071270
   • Function: deposit(bytes32) → selector 0xb214faa5
   • Input data (after selector):

     <32‑byte positionKey>
     

2. Withdraw 0.0025 ETH margin

   • Tx: 0xa257235b31c9a47e2d3f5b6c7a8d9e0f1b2c3d4e5f6a7b8c9d0e1f2a3b4c5d6e
   • Contract: SynFuturesGate: 0x208B443983D8BcC8578e9D86Db23FbA547071270
   • Function: withdraw(bytes32) → selector 0x8e19899e
   • Input data:

     <32‑byte positionKey>
     

3. Swap ETH → ALB on Uniswap V3

   • Tx: 0x8a8f799dd2e1f0a8b1123a4c5d6e7f8192a3bc4d5e6f7a8b9c0d1e2f3a4b5c6d
   • Contract: UniswapV3SwapRouter: 0xE592427A0AEce92De3Edee1F18E0157C05861564
   • Function: exactInputSingle((address,address,uint24,address,uint256,uint256,uint256,uint160)) → selector 0x04e45aaf
   • Input data:

     // pool fee, tokenIn= WETH (0x4200000000000000000000000000000000000006), 
     // tokenOut= ALB (0x1dd2d631c92b1aCdFCDd51A0F7145A50130050C4), 
     // recipient, deadline, amountIn, amountOutMinimum, sqrtPriceLimitX96…
     

4. Approve ALB to SynFuturesGate

   • Tx: 0x25b42a8285f3c0a7d8e9f0a1b2c3d4e5f6a7b8c9d0e1f2a3b4c5d6e7f8a9b0c
   • Contract: ALB token: 0x1dd2d631c92b1aCdFCDd51A0F7145A50130050C4
   • Function: approve(address,uint256) → selector 0x095ea7b3
   • Input data:

     spender = 0x208B443983D8BcC8578e9D86Db23FbA547071270  
     amount  = 0xffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffff
     

5. Deposit 139.477206210286887926 ALB

   • Tx: 0xa77ce5a4bede958c17097bbcd7890675ca6f9f06864fe0a4e50cca01fbb940c7
   • Contract: SynFuturesGate: 0x208B443983D8BcC8578e9D86Db23FbA547071270
   • Function: deposit(address,uint256) → selector 0x47e7ef24
   • Input data:

     token  = 0x1dd2d631c92b1aCdFCDd51A0F7145A50130050C4  
     amount = 0x00000000000000000000000000000000000000000000000178fa29410fc0ea3f6
     

6. Open position (long ALB perp)

   • Tx: 0x17b9dd2c3caef9c5d3fbb7bdd4ab0a07e45701d6512508f06f1ab8b4b62ef51be0
   • Contract: SynFuturesInstrumentALBUSDC: 0xb146f1e409d45862354bebc3acdfb31e0e1488dc
   • Function: trade(bytes32[2]) → selector 0x50347fcb
   • Input data (two 32‑byte words):

     arg1 = 000000000000000000000000000000000000000000000000fffffffffffee001  
     arg2 = 0000000000000000000000000000000000000000000000036c3b5c6000000000
     

7. Close position (reduce‑only)

   • Tx: 0x1a4e2069d4d0f082af28f038d23a261599f5965b16745df2c96c74aa3e3d80811
   • Contract: SynFuturesInstrumentALBUSDC: 0xb146f1e409d45862354bebc3acdfb31e0e1488dc
   • Function: trade(bytes32[2]) → selector 0x50347fcb
   • Input data:

     arg1 = 000000000000000000000000000000000000000000000000abcdefabcdefabcd  
     arg2 = 0000000000000000000000000000000000000000000000054321432143214321
     

8. Withdraw 138.54860995083966535 ALB

   • Tx: 0x79cb2e4aa2b1f0a8b1123a4c5d6e7f8192a3bc4d5e6f7a8b9c0d1e2f3a4b5c6d
   • Contract: SynFuturesGate: 0x208B443983D8BcC8578e9D86Db23FbA547071270
   • Function: withdraw(bytes32) → selector 0x8e19899e
   • Input data:

     <32‑byte positionKey>
     

9. Approve ALB to Uniswap V4 Router

   • Tx: 0x27f8af7958a3c0a7d8e9f0a1b2c3d4e5f6a7b8c9d0e1f2a3b4c5d6e7f8a9b0c
   • Contract: ALB token: 0x1dd2d631c92b1aCdFCDd51A0F7145A50130050C4
   • Function: approve(address,uint256) → selector 0x095ea7b3
   • Input data:

     spender = 0xEf1c6E67703c7BD7107eed8303Fbe6EC2554BF6B  
     amount  = 0xffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffff
     

10. Swap ALB → ETH on Uniswap V4

    • Tx: 0xf7d2024998aec0a7d8e9f0a1b2c3d4e5f6a7b8c9d0e1f2a3b4c5d6e7f8a9b0d
    • Contract: UniswapV4UniversalRouter: 0xEf1c6E67703c7BD7107eed8303Fbe6EC2554BF6B
    • Function: execute((address,uint256,uint256,bytes)[],address[]) → selector 0x761877dc
    • Input data:

      // array of swap steps: (tokenIn=ALB, amountIn, amountOutMin, path), plus recipient list…
      

How to derive the 4‑byte selector

1. Take its signature, e.g. "trade(bytes32[2])".
2. Compute the Keccak‑256 hash of that UTF‑8 string
3. Take the first 4 bytes (8 hex characters) of the result.
4. That 4‑byte slice, prefixed with 0x, is the function selector you see in the raw input data.