Hold the asset, short the same size in a perpetual. Price moves offset, so direction stops mattering, and while funding is positive the short leg is paid. The yield is the funding, and it is real.
It is a genuine structural trade and it works. What follows is what remains after the delta is gone, because those are the things that actually decide the outcome.
Funding is a floating rate, not a coupon
Nothing fixes it. It is recalculated every interval and it can go negative, at which point the trade pays instead of earning. Modelling a period of high funding forward as though it were a yield is the most common error, and it makes a variable stream look like an instrument it is not.
The margin leg is where it breaks
The short perpetual needs margin, and if price rises sharply that leg loses. On paper the spot leg gains exactly as much — but they usually sit in different places, and the venue holding the short will liquidate it on its own margin rules without any knowledge that you are hedged elsewhere.
That is the real failure mode: a delta-neutral position liquidated on one leg, leaving you long spot into whatever comes next, at the worst possible moment. Under isolated margin the leg dies alone; under cross it can take the rest of the account with it.
The costs that eat the yield
Fees on both legs at entry and exit, and again on any rebalance. Slippage on both. The mark price governing your margin coming from an index, not from the venue where you bought spot, so the legs can disagree briefly. And the venue risk on whatever holds the collateral.
None of these is exotic. Together they turn a headline funding yield into something considerably smaller, and a trade described as risk-free into one whose risks simply moved somewhere less visible than price.