Basis-Driven Futures Market Making with a Moving-Average Fair Price

Summary

This example builds a BTCUSDT futures market-making strategy whose fair price is estimated from a spot reference price plus a smoothed spot–futures basis. It resamples spot and futures book-ticker mid-prices, carries observations forward, and calculates a rolling basis average. The strategy refreshes limit-order quotes on a grid, adjusts bid and ask distances according to inventory, and caps exposure by a dollar limit.

The document describes backtests using Binance futures order-book data, latency inputs, queue modeling, and a fee model that includes a maker rebate. It also suggests comparing different spot references, including BTCFDUSD or the futures index. It provides code and plotted outputs, but no written interpretation or numerical performance results. The approach assumes the basis tends to revert toward its recent average; this assumption may fail or change over time. Results also depend on the chosen rebate, market data, execution assumptions, and risk settings, so the example does not establish live profitability.

Key ideas

• The fair price combines a spot mid-price with the rolling mean of the spot–futures basis.
• The example uses a five-minute rolling basis estimate derived from book-ticker prices resampled at 100-millisecond intervals.
• Quote distances respond to current inventory, while a dollar exposure limit constrains new orders.
• The backtest incorporates latency, queue position, fees, and a maker rebate, all of which affect simulated results.
• The basis mean-reversion assumption and the selected spot reference require validation across market conditions.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.