Measuring Delivery–Perpetual Spreads for Crypto Intertemporal Hedging
Summary
The article introduces intertemporal hedging by pairing a long position in one contract with a short position in another, then closing both when the combined result is favorable. It derives the basic spread relationship for a short in contract A and a long in contract B: before costs, the trade profits when the opening spread exceeds the closing spread. It suggests comparing longer-dated delivery futures with perpetual contracts, whose prices are described as tracking spot more closely.
Rather than specify completed entry and exit rules, the article builds a monitoring example for several crypto pairs. It retrieves bid and ask quotes for selected delivery and perpetual contracts, calculates two executable-side spread measures, and displays them in tables and charts. A live run is illustrated, but no measured profitability or systematic backtest is presented. Fees, slippage, funding, contract specifications, liquidity, and spread behavior can materially affect a real hedge; the article also characterizes the risk as lower only in relative terms.
Key ideas
- A two-contract hedge can be evaluated through the change in the price spread between opening and closing.
- For a short delivery contract and long perpetual contract, the theoretical trade profits when the opening spread exceeds the closing spread.
- The example compares selected delivery futures and perpetual contracts across multiple crypto assets.
- Bid and ask quotes are used to calculate spread measures and plot their movement over time.
- The monitoring example does not establish profitability, and fees, slippage, funding, and contract details matter.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.