๐น Strategy (Cash-and-Carry Arbitrage) ๐ฐ
Condition: BTC/USDT price in the spot market is lower than the futures price โ the market is in Contango.
1๏ธโฃ Buy BTC in the spot market (Spot)
You actually buy Bitcoin for USDT at a lower price ๐ต
2๏ธโฃ Sell BTC in futures contracts (Futures)
You open a Short position on the same amount of Bitcoin for USDT at a higher price ๐
Result:
Upon settlement or price convergence, BTC can be delivered from Spot against the futures contract.
The difference between the purchase price in Spot and the selling price in Futures โ Almost guaranteed profit ๐
๐ Summary:
Spot < Futures โ Open a buy position in Spot + a sell position in Futures
๐น Strategy (Reverse Cash-and-Carry Arbitrage) ๐
Condition: The price of BTC/USDT in the spot market is higher than the futures price โ The market is in a state of Backwardation.
1๏ธโฃ Sell BTC in the spot market (Spot)
If you own BTC, sell it at a higher price ๐ต
If you do not own BTC, you can borrow (Borrow BTC) and then sell Spot
2๏ธโฃ Buy BTC in futures (Futures)
You open a Long position at a cheaper price ๐
Result:
Upon settlement or price convergence, you profit from the difference between selling in Spot and buying in Futures ๐
The profit remains almost guaranteed, considering:
Trading fees ๐ธ
Borrowing costs if you sell BTC you do not own
Funding Rate in perpetual contracts
๐ Summary:
Spot > Futures โ Open a sell position in Spot + a buy position in Futures
๐ก Tip for professionals:
Always compare the price of BTC in the spot market and futures before making any trade, and write in the comments which strategy you will choose based on the price difference!
