Strategy · Arbitrage
CASH-AND-CARRY BASIS TRADE
NeutralDefined riskAdvanced
Overview
Buy spot BTC and simultaneously short an equal-notional dated futures contract trading at a premium to spot. Lock in the basis (futures premium) as a near risk-free yield until expiry.
Setup
- 1.Identify a dated futures contract (CME or Deribit) trading >5% annualized above spot.
- 2.Buy spot BTC on a deep-liquidity venue.
- 3.Open a short of equal notional in the dated futures contract.
- 4.Hold both legs until futures expiry — basis converges to zero by definition.
- 5.Monitor margin on the short leg; top up if BTC rallies sharply.
- 6.Roll into the next contract month if basis remains attractive.
Max profit
Annualized basis (typically 5-25%) minus fees and funding.
Max loss
Limited but non-zero: liquidation of short leg, exchange counterparty failure, or funding spikes.
Breakeven
Captured basis exceeds combined trading and financing costs.
When to use
In bullish regimes when futures contango widens. Common during ETF inflow surges or pre-halving rallies.
When to avoid
When basis is below 5% annualized — yield doesn't compensate for counterparty risk. Avoid on weak exchanges.