Arbitrage in finance, as shown in the image, involves exploiting differences in rates or prices between markets to make risk-free profits. Here I explain how to use arbitrage based on the data from the image, which seems to refer to perpetual funding rates (like in cryptocurrency markets):
Key data from the image:
Income for 3 days: 27.01 USDT.
Cumulative rate for 3 days / %APR: -0.5403% / 65.74%.
Cumulative rate for 7 days / %APR: -0.7236% / 37.73%.
Cumulative rate for 30 days / %APR: -0.7115% / 130.32%.
Previous funding rate: -0.0459%.
Next funding rate: -0.0478% (at 00:20:40).
Spread rate: 0.19%.
Daily/annual interest (loan): 0.226222% / 82.57%.
Open interest: 4.34M USDC.
Chart: The funding rate has fluctuated between -0.0790% and 0.0083%, with a current value of -0.0459% (at 15:00 on 06-03).
Steps to use arbitrage:
Understand the funding rate:
The negative funding rate (-0.0478%) indicates that short traders pay long traders. This is common in perpetual cryptocurrency contracts like those of KAITO/USDC.
If you open a long position, you will receive this funding rate, generating passive income.
Identify the arbitrage opportunity:
The negative funding rate (-0.0478%) means you can make money simply by holding a long position, while short traders pay you.
The loan interest (0.226222% daily) is higher than the negative funding rate. This suggests that you could finance your long position with a loan and still make a net profit if the financing costs are lower than the income from the rate.
Arbitrage strategy:
Open a long position in KAITO/USDC: Use an exchange that offers perpetual contracts (like Binance, Bybit, etc.).
Finance the position with a loan: You can borrow USDC at 0.226222% daily (82.57% annually). This means that for every 1000 USDC borrowed, you pay 2.26 USDC per day in interest.
Receive the funding rate: With a rate of -0.0478%, short traders pay you. If your long position is 1000 USDC, you would receive approximately 0.478 USDC for each funding period (usually every 8 hours, so 3 times a day = 1.434 USDC daily).
Calculate the net profit:
Income from funding: 1.434 USDC/day.
Loan cost: 2.26 USDC/day.
Net profit: 1.434 - 2.26 = -0.826 USDC/day (loss in this case).
Note: In this example, the loan cost (0.226222% daily) is higher than the income from funding (0.0478% every 8 hours). This indicates that arbitrage would not be profitable here unless you find a cheaper loan or a more favorable funding rate.
Look for better conditions:
Look for an exchange or platform with more negative funding rates or lower loan costs.
Monitor the chart: The rate has been as low as -0.0790% recently, which could increase your income if you open a long position at a more favorable time.
Risks to consider:
Price volatility: If the price of KAITO drops, your long position could lose value, negating the gains from the funding rate.
Changes in the funding rate: The rate may become positive, forcing you to pay instead of receive.
Additional costs: Exchange fees or spreads (0.19% in this case) can reduce profits.
Conclusion:
In this case, arbitrage does not seem profitable because the loan cost (0.226222% daily) exceeds the income from the funding rate (-0.0478% every 8 hours). For arbitrage to work, you would need:
A more negative funding rate (like the -0.0790% seen earlier).
A cheaper loan (lower than 0.0478% x 3 = 0.1434% daily).
Or a strategy that combines this position with another (for example, a short position in another market to hedge against price risk).
If you want to explore other arbitrage opportunities, I can help you analyze more data or look for additional information, although I would need web search access to obtain current rates from other exchanges. Would you like to continue learning?
Disclaimer: #AnfeliaInvestment is not a financial adviser; please consult one. Don't share information that can identify you.