#SpotVSFuturesStrategy
ChatGPT said:
The hashtag #SpotVSFuturesStrategy refers to a comparison or trading strategy involving the spot market and the futures market. Traders and investors use both to profit from price movements, hedge positions, or exploit arbitrage opportunities. Hereās a breakdown of common Spot vs. Futures strategies:
š 1. Spot-Futures Arbitrage
Goal: Profit from price differences between spot and futures prices.
How it works:
Buy the asset in the spot market.
Sell the corresponding futures contract.
Hold until expiration; profit from the convergence of prices.
Used when: Futures are trading at a premium (contango) or discount (backwardation).
š 2. Cash and Carry Arbitrage
Goal: Risk-free profit in contango.
How it works:
Buy asset in spot market.
Short futures contract.
Hold the asset and deliver at futures expiry.
Profit = Futures price - (Spot price + carrying cost).
š”ļø 3. Hedging Spot Positions with Futures
Goal: Protect against adverse price movements.
How it works:
Long spot position (e.g., crypto, stocks)? Short a futures contract to hedge.
Short spot position? Go long on futures.
š 4. Basis Trading
Basis = Spot Price - Futures Price.
Strategy: Trade the basis when it widens or narrows more than expected.
Often used by institutions or advanced traders.
š” Key Considerations:
Leverage: Futures offer higher leverage but increase risk.
Expiry & Rollovers: Futures expire; you may need to roll over contracts.
Funding Rates: Especially in crypto, these can affect long/short futures positions.
š Example: Crypto Market
In crypto, traders might go long Bitcoin spot and short perpetual futures when the funding rate is positive, collecting the funding payments as passive income.
Would you like a specific trading bot strategy, a backtestable Python code, or a visual explainer of these?
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