Contract arbitrage experts teach you how to avoid risks and achieve stable profits!
If you want to play with large funds, spot and contract hedging is a great trick. Perpetual contracts incur funding fees three times a day, and there are plenty of arbitrage opportunities hidden in this. How to operate? Simply put, find two exchanges, see which one has a higher funding fee, then open a short position where the funding fee is high and a long position where it is low, setting prices, margins, and multipliers accordingly, and hedge like that to capture the funding fee. A multiplier of 5 to 10 times is the most suitable; too high risks liquidation, and too low is not profitable, plus frequent rebalancing incurs high fees.
Now let's talk about leveraged contract arbitrage, which is a great way to improve fund utilization. For example, if you have 10,000 USDT, borrow some USDT from the exchange, with a daily interest rate fee of only 0.02%. Then, find a contract funding fee that adds up to no less than 0.03% a day, and you can make a profit. However, as more people engage in arbitrage, the funding fees won't be that high. Recently, I used 10,000 USDT as leverage to buy 1 BTC on the Gate exchange, and then opened 1,000 BTC/USDT short positions on the Bigone exchange, with daily funding fees ranging from 0.1% to 0.2%. Of course, finding high funding fee cryptocurrencies requires personal effort, and some software can help; I’ve encountered funding fees as high as 6%!
Speaking of risks, slippage can be a headache. The buy and sell prices on both sides need to match; usually, a limit order will suffice unless there is significant market fluctuation, otherwise, there shouldn't be any issues. If you buy at a low price with leverage and open a short position at a high price, you can still earn some price difference. When selling with leverage, set the order price a bit higher than the contract's stop-loss price to reduce slippage.
Another risk is incurring losses. Generally, if the price rises and you sell at the set price, you won't incur losses. But if the price suddenly retraces and the leverage is pushed to the liquidation price, while the contract is forcibly closed for profit, that could lead to losses. Therefore, during significant pullbacks, it’s best to close your positions in advance; safety first!
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