Crypto Arbitrage Between Spot, Futures, and Perpetual Swaps
Summary
The document explains two crypto arbitrage approaches: spread trading between spot and futures or between derivatives, and funding-rate trading that pairs a spot position with an opposing perpetual swap. It describes how opposing legs can offset much of the underlying price exposure. For funding arbitrage, the proposed perpetual position depends on the funding rate’s sign: short when positive and long when negative to receive payments. The guide also outlines an exchange bot workflow for selecting instruments, setting order size and prices, choosing margin mode, and submitting both legs.
A numerical example shows how a spot purchase and futures short can produce a small locked-in spread at settlement in either direction, before fees. The guide notes that fees reduce returns, funding can reverse and turn costly, leverage increases liquidation risk, and sequentially filling the second leg can shrink the spread. These examples explain mechanics, but do not establish realized profitability; execution quality, legging risk, margin requirements, and changing basis or funding remain important constraints.
Key ideas
- Spread arbitrage pairs opposite positions in related spot and futures or derivative instruments to capture a price difference.
- Funding-rate arbitrage pairs spot exposure with an opposing perpetual swap position selected according to the funding rate’s sign.
- The example illustrates that the spread may remain at settlement before fees even when the underlying price moves.
- Fees, changing funding, liquidation, and execution between legs can reduce or erase expected returns.
- Leverage increases capital efficiency while raising liquidation risk.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.