Implied Yield

Implied yield refers to the annualized return a trader expects to earn by holding a position, often derived from the pricing of futures or the funding rates of perpetuals. It is calculated by comparing the current market price of the derivative to the spot price.

If a futures contract trades at a premium, the implied yield is positive, suggesting that long holders are paying for the privilege of leverage. This metric is a vital indicator of market sentiment and the cost of capital in the crypto ecosystem.

Investors use implied yield to compare the attractiveness of different trading venues and assets. A high implied yield may attract yield farmers, while a low or negative yield might indicate bearish sentiment.

It is a fundamental component of quantitative finance used to price and evaluate derivative products.