Delta-Neutral Spot and Perpetual Funding Arbitrage
Summary
The document outlines a crypto cash-and-carry style approach called Smart Arbitrage: hold an asset in the spot market while shorting a matching amount through a perpetual swap. The opposing exposures are intended to keep the position approximately delta-neutral, making funding payments the main prospective return when funding is positive. The article suggests the approach may be considered in bearish or sideways conditions and says the bot automates position management, though it provides no simulation details or performance evidence.
The claimed hedge does not remove all risk. The text specifically notes that fast market moves can create temporary size mismatches and that the perpetual position can be liquidated. Returns also depend on funding rates, borrowing demand, fees, execution, margin requirements, and whether the hedge remains balanced; these factors are not quantified. Its claim that low borrowing demand can improve relative returns is not demonstrated and may not hold across venues or regimes. The material is a high-level product description, not a tested strategy specification or guarantee of steady income.
Key ideas
- A spot holding paired with an equal perpetual short aims to reduce directional exposure.
- Funding payments are the proposed source of return, particularly when the funding rate is positive.
- Automated rebalancing is presented as a feature of the strategy’s bot implementation.
- Position mismatches and liquidation are identified as risks despite the intended delta hedge.
- Funding variability, execution costs, and margin parameters are not quantified in the document.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.