Cash-and-Carry Trading with Bitcoin Spot and Futures
Summary
The article walks through a bitcoin cash-and-carry trade: buy BTC in the spot market, short a similarly sized futures position, then close the futures short and sell the BTC when the futures premium has narrowed. The paired positions are intended to reduce directional exposure while capturing the basis. It cautions that annualized premium alone can mislead, especially near expiry, because a small dollar premium may be consumed by fees and slippage. The example uses a longer-dated contract and discusses using limit orders to control execution prices.
The walkthrough reports that a trade opened with 3,000 USDC ended with a little over 3,032 USDC, a net gain slightly above 1% after the described execution. It also explains how a futures spread can roll the short to a later expiry and capture additional premium. The author highlights trade-offs among keeping collateral on an exchange, using leverage, and relying on a custodian. The example is not a guarantee of returns: execution can fall short of ideal prices, and exchange, custodian, liquidation, and collateral risks remain relevant.
Key ideas
- Cash-and-carry pairs a spot purchase with a similarly sized futures short to target the basis while limiting delta exposure.
- A futures premium should be assessed in dollar terms alongside annualized rates, fees, and slippage.
- Limit orders can bound execution prices but may not fill or may leave a position exposed while waiting.
- Futures spreads can roll a short into a later expiry while capturing the difference between contracts.
- Collateral arrangements trade off liquidation risk against exposure to an exchange or custodian.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.