#SpotVSFuturesStrategy

🔍 Spot vs Futures Strategy: Overview

Spot Market: Buying or selling an asset (like Bitcoin, stocks, or commodities) for immediate delivery.

Futures Market: Entering a contract to buy or sell an asset at a predetermined price at a future date.

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⚖️ Key Differences

Feature Spot Market Futures Market

Ownership You own the actual asset No ownership, just a contract

Leverage Typically none or low High leverage available

Risk Lower (if unleveraged) Higher due to leverage and liquidation

Use Case Long-term investing Hedging, speculation, arbitrage

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💡 Popular Spot vs Futures Strategies

1. Cash and Carry Arbitrage:

Buy the asset in the spot market.

Sell the same asset in the futures market (short futures).

Lock in the difference (if futures price > spot price).

Used in contango markets (futures > spot).

2. Reverse Cash and Carry Arbitrage:

Sell short in the spot market.

Buy the asset via futures contract.

Profitable when the futures price < spot price (backwardation).

3. Hedging with Futures:

If you're long in the spot market, you can hedge against downside risk by shorting futures.

4. Basis Trading:

Trade the basis, i.e., the difference between the spot and futures price.

Profitable when expecting convergence near futures expiry.

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📈 Example (Crypto Arbitrage):

Spot BTC = $60,000

Futures BTC (3-month) = $62,000

Strategy:

1. Buy BTC spot

2. Short BTC futures

3. Lock in $2,000 profit per BTC (minus fees and funding)

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🧠 Considerations:

Fees & Funding Rates: Futures often have ongoing costs (funding or margin).

Counterparty Risk: Especially in crypto or unregulated markets.

Expiration Dates: Futures need to be monitored and rolled over.

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