How to Build a Delta-Neutral Strategy Using Crypto Perps and Spot

Prices in the cryptocurrency market can fluctuate sharply within minutes, presenting both significant opportunities and inherent risks. A delta-neutral strategy offers a way to generate returns without taking a directional view on assets like Bitcoin, Ethereum, or other cryptocurrencies. This approach focuses on minimizing price exposure while seeking to profit from other market factors such as funding rates, arbitrage opportunities, and market inefficiencies.

In this guide, we’ll break down what delta-neutral means, how to build one using crypto perpetual futures (perps) and spot positions, and what to watch out for—especially when it comes to funding rate effects.

What Is a Delta-Neutral Strategy in Crypto?

A delta-neutral strategy is one where your net delta, your portfolio’s overall sensitivity to changes in the underlying asset’s price, is kept close to zero. In practical terms, this means that if the price moves up slightly, the gains and losses from different positions offset each other, and the same happens if the price moves down. 

In the crypto market, traders often create this balance by going long on the asset in the spot market while shorting the same amount in perpetual futures contracts. Once the price exposure is hedged, the objective shifts from profiting on price movement to generating returns through funding payments, arbitrage opportunities, or yield earned on the spot holdings.

Why Combine Perps and Spot for Delta-Neutral Strategies?

Perpetual futures and spot positions work well together for delta-neutral setups because:

• No expiry on perps: You can maintain a short position indefinitely to hedge your spot long.

• Funding rate opportunities: If perp funding is positive and you’re short perps, you receive payments from long traders.

• Liquidity and execution speed: Major perp and spot pairs offer deep liquidity for low-slippage adjustments.

• Spot staking/yield: Long spot positions can potentially earn staking rewards or be used in other yield-generating protocols.

Step-by-Step: Building a Delta-Neutral Position

Step 1: Choose Your Asset

Select a highly liquid crypto asset like BTC, ETH, or SOL for lower slippage and better funding rate capture.

Step 2: Go Long on Spot

Buy the chosen asset on the spot market. For example:

• Buy 1 BTC at $50,000 on the spot market.

Step 3: Open an Equal Short Position in Perps

On the perps market, short the same notional value as your spot position.

• Short 1 BTC worth of BTC/USDT perpetual contracts at $50,000.

This offsets your delta so small price moves won’t significantly affect your position value

Step 4: Monitor Funding Rates Closely

This is where profit (or loss) potential comes in:

• If funding rate is positive: Short perp traders (you) receive payments from long traders.

• If funding rate is negative: Short traders pay funding to longs—meaning your delta-neutral setup could lose money over time.

Example:

• Funding rate: +0.01% every 8 hours

• Notional position: $50,000

• Daily funding income: $50,000 × 0.0001 × 3 = $15/day

If the funding rate flips negative:

• Funding cost: $50,000 × 0.0001 × 3 = –$15/day

• Over time, negative funding can erode returns, so adjustments may be needed.

Step 5: Maintain Balance

Even in a delta-neutral position, imbalances can arise due to:

• Asset price changes

• Contract specifications (e.g., inverse vs. linear perps)

• Funding rate shifts

Rebalancing ensures your net delta stays close to zero.

Example: Delta-Neutral BTC Setup

Your profit or loss will then depend largely on:

• Funding rate payments

• Any yield from spot holdings

• Transaction and spread costs

Advantages of Delta-Neutral Perp + Spot Strategies

• Market-direction hedging: Reduces exposure to volatile price swings.

• Funding rate income: Can generate steady yield when funding rates are favorable.

• Works in multiple market conditions: Profitable in bullish, bearish, or sideways markets if rates align.

• Flexibility: Spot holdings can be staked, lent, or used in DeFi for extra returns.

Risks to Consider

• Negative funding rates: Can turn a profitable setup into a loss over time.

• Execution costs: Fees, spreads, and slippage can eat into returns.

• Platform risk: Always use exchanges with strong security and deep liquidity.

• Imperfect hedges: Price movements can still cause small imbalances that need rebalancing.

A delta-neutral strategy using crypto perps and spot can offer a way to earn yield while avoiding heavy exposure to price direction. The main drivers of profitability are funding rates, execution efficiency, and disciplined rebalancing.

When funding rates are favorable, this strategy can generate steady income while maintaining low risk. However, if rates turn negative, traders should adapt by either reducing exposure or reallocating to assets with more favorable funding conditions.

Execute Your Delta-Neutral Strategy with Precision on Flipster

Flipster’s zero spreads, ultra-low fees, and instant execution give you the tools to execute your delta-neutral strategy without losing edge to trading costs.

Sign up today and start trading like a pro whether the market goes up, down, or sideways.

Disclaimer: This material is for information purposes only and does not constitute financial advice. Flipster makes no recommendations or guarantees in respect of any digital asset, product, or service. Trading digital assets and digital asset derivatives comes with a significant risk of loss due to its high price volatility, and is not suitable for all investors. Please refer to our Terms.