#SpotVSFuturesStrategy The hashtag #SpotVSFuturesStrategy typically refers to trading or investment strategies that compare or exploit differences between the spot and futures markets. Here's a breakdown of what it means and some common strategies used:
🔍 Spot vs Futures: Basics
Spot Market: The asset (e.g., BTC, oil, stocks) is bought or sold for immediate delivery.
Futures Market: Contracts are traded to buy or sell an asset at a future date and a predetermined price.
📊 Common Spot vs Futures Strategies
1. Cash and Carry Arbitrage
When to Use: Futures price > Spot price + Cost of carry
Strategy:
Buy the asset in the spot market
Sell a futures contract
Hold until expiry to lock in the price difference
Goal: Profit from the premium in futures.
2. Reverse Cash and Carry Arbitrage
When to Use: Spot price > Futures price (backwardation)
Strategy:
Short the asset in the spot market
Buy the futures contract
Deliver at expiry
Goal: Profit from futures trading at a discount.
3. Hedging Spot Positions
Use Case: Protect spot holdings from downside risk.
Strategy:
Long spot
Short futures to hedge downside
Common with commodities or cryptocurrencies.
4. Basis Trading
Basis = Futures Price - Spot Price
Strategy focuses on trading the convergence or divergence of this basis over time.
⚠️ Risks to Watch
Margin Requirements: Futures require maintenance margins.
Funding Rates (for perpetual futures): Can erode profits or add costs.
Liquidity Differences: Spot and futures markets may not have the same liquidity.
Slippage/Execution risk: Especially during high volatility.
Would you like a code example, backtest, or real-market data to help apply this strategy (e.g., for BTC or ETH)?