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What is Binance Smart Arbitrage and how does it work?
The Smart Arbitrage is an innovative tool designed for traders to engage in arbitrage strategies between perpetual futures contracts and their spot equivalents. It leverages the funding rate mechanism by hedging their futures position with a spot position to collect the funding fee.
In Smart Arbitrage, the product builds a strategic combination of futures and spot. It involves futures trading that needs to comply with futures trading rules.
Arbitrage involves going long in one market (e.g., spot) and short in the other (e.g., futures) to collect the funding fee. The funding rate arbitrage strategy is delta-neutral, meaning it aims to hedge out price movement risks by taking opposite positions in the futures and spot markets. This strategy implies that no matter the price change direction, your profit on a long position will offset your loss on short (or vice versa), and you will collect the funding fee. The goal is to profit from the funding rate payments without being exposed to significant price volatility risks.
Here are the answers for completing quiz for Smart Arbitrage
What are funding fees in Perpetual Futures trading?
Funding fees are periodic payments between long and short position holders in perpetual futures markets, intended to align the futures prices with the spot prices of the underlying asset.
Funding fees = position size x funding rate
Funding rate then determines the funding fee, fluctuating over time for every symbol independently. You can find an overview of the funding rate here for each symbol on Binance Futures. For more information about funding rates, please refer to Introduction to Binance Futures Funding Rates.
How to get started with Smart Arbitrage?
Subscribing to Smart Arbitrage
1. Head to [Earn] - [Advanced Earn] - [Smart Arbitrage] on the web.
2. Choose the principal and portfolio of your arbitrage strategy, and then click [Subscribe] to start.
3. Input your investment amount and click [Confirm].
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