Premium Index

What is the premium index?

It measures the percentage spread between a perpetual contract's price and the underlying spot index. A positive premium means the perpetual trades above spot.

How does it relate to funding rates?

Exchanges average the premium index over each funding interval to set the funding rate, so a persistently positive premium leads to longs paying shorts.

How do traders read it?

Extreme positive premium signals overheated long leverage (short-squeeze fuel already spent); deep negative premium signals capitulation or aggressive shorting.