Bitcoin Cash and Carry: Capturing the Futures Basis
Summary
The document explains a bitcoin cash and carry trade, also called basis trading. A trader buys bitcoin in the spot market and shorts a dated futures contract priced above spot. Because the futures price converges toward the settlement price as expiry approaches, the trader aims to capture the premium while the offsetting positions hedge broad bitcoin price movements. The lesson describes opening and closing both legs, closing early if the premium reaches zero or turns negative, and rolling into a later contract when its premium is attractive.
A historical futures premium chart and worked examples illustrate the mechanics, including how the combined position can retain a fixed dollar value when the basis closes. The strategy still involves costs and constraints: capital is tied up, exchange collateral creates counterparty exposure, and leverage can bring liquidation risk. Keeping some assets outside the exchange may reduce custody exposure but requires time to transfer funds if collateral is needed. Returns depend on the available premium, fees, funding and the time until convergence; the document’s low-risk characterization does not remove these risks.
Key ideas
- A cash and carry trade pairs a spot purchase with a short position in a premium dated future.
- The expected source of return is convergence of the futures premium toward zero by settlement.
- A trader may close early when the premium disappears or becomes a discount, or roll into a later contract.
- Collateral location and leverage affect exchange exposure and liquidation risk.
- The premium must be weighed against fees, capital lockup and alternative uses of funds.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.