#SpotVSFuturesStrategy The Spot vs. Futures strategy involves simultaneously trading in the spot market and the futures market to take advantage of price differences, hedge risks, or obtain arbitrage profits. Below are the main strategies and how they work:

🔹 1. Cash-and-Carry Arbitrage (Contango Arbitrage)

Practical case: Futures are priced with a premium over the spot price.

✅ It is used when the futures market is in contango (futures > spot).

🔹 2. Inverse Cash-and-Carry Arbitrage (Backwardation Arbitrage)

Practical case: Futures are priced below the spot price (backwardation).

🔹 3. Basis Trades

Basis = Spot Price - Futures Price

Long the basis: Buy spot, sell futures (expecting the basis to widen).

Short the basis: Sell spot, buy futures (expecting the basis to narrow).

🧠 Popular among commodity traders, cryptocurrency markets, and institutional trading desks.

🔹 4. Hedging Strategy

Objective: Reduce the risk arising from price fluctuations in the spot market.

A company that owns an asset (e.g., oil, Bitcoin) can sell futures to protect against price drops.

A company that plans to buy an asset later can buy futures now to lock in a price.

🛡️ It is used to manage risk, not to profit from price differences.

🔹 5. Speculative Trades

Traders can go long in one market and short in the other based on the expected convergence or divergence of prices.