How do you build your own hedging arbitrage strategy? Shenyu once said that the most influential thing about him was #arbitrage thina5w4f3f7at9.sg.larksuite.com/wiki/NPczwZKWa… losing principal is the most advanced form of investment. Spread arbitrage is about exploiting the price difference between similar investments in the market, buying undervalued and selling overvalued, and then waiting for the value to return to profit. It can be generally summarized as #rate arbitrage, #spot arbitrage, #cross-period arbitrage, and #cross-market arbitrage. [Full text]👉🔗
1/ Rate arbitrage: The price of a perpetual contract is anchored to the spot price through a funding mechanism. Funding is charged every 4 or 8 hours. 🎯 Theoretical funding = position value * funding rate. ✅ When the funding rate is positive, longs pay shorts. ✅ When the funding rate is negative, shorts pay longs.
2/ Fee Arbitrage: When the funding rate is positive, open a short position in a U-margined perpetual contract and buy spot of the same value. High leverage improves fund utilization, but when the price surges, there may not be enough time to transfer margin from spot to contract, resulting in a margin call. Or within 1x leverage, open a short position in a currency-margined perpetual contract, because the margin is the spot itself, hedging the risk of rising and falling prices. When the funding rate is negative, arbitrage is generally not performed unless the investment is based on the corresponding currency.
3/ Cross-period arbitrage: It is more suitable for establishing trading positions of equal quantity and opposite direction on delivery contracts of different periods of the same trading product with the goal of currency-based returns. When the prices of different periods return to normal, close the forward contract. When the price of the forward contract is higher, buy the near-term contract and sell the forward contract to conduct cross-period arbitrage. When the price of the near-term contract is higher, cross-period arbitrage is not recommended. Cross-market arbitrage: arbitrage on different exchanges, the profit margin is already small.
4/ Futures-spot arbitrage: By reversing the value of futures and spot at delivery, the price difference between futures and spot can be closed to make a profit. When the futures price is higher than the spot price and exceeds the various costs used for delivery (time cost, handling fees), buy spot and sell futures. As delivery approaches, the closing price of the spot price will be higher than the futures price when the price returns to normal. This operation requires selling spot and buying futures. This operation is only possible for long-term spot holdings, such as investors who hold BTC for a long time.
There are very few people in the market who can truly judge the medium- and long-term trends. Although many people talk about trends, most of them are just concepts or ignore the time value. For example, when Bitcoin was at 69,000 in 2021, it was said that it would definitely rise to 100,000. Is this a correct trend judgment? Obviously wrong, because it fell to 16,000 first. Arbitrage is indeed a common and stable strategy. Find loopholes in the market and make stable small profits. Tonight @sunyangphp and community leader Qiu will share with everyone the experience and experience of group members in doing arbitrage.
