Using Crypto Futures Spreads to Trade Basis and Roll Positions
Summary
The article explains a futures spread as a paired position in futures contracts on the same asset with different expiries. A spread order book lets a trader buy one expiry and sell another in a single order, trading the price difference between the contracts. The piece focuses on BTC and ETH futures spreads on Deribit and their potential uses for spread speculation and transferring exposure between expiries.
To illustrate liquidity, it reports two order-book snapshots from August 2023: most observed books were one tick wide, and resting quotes were typically larger than $100,000 on both sides. The author argues that tighter quotes and a fee discount can reduce trading costs, while simultaneous execution removes leg risk and gives a known combined price. Examples include rolling a delta hedge or a cash-and-carry position. The evidence is limited to two snapshots on one venue, so it does not establish persistent liquidity or execution quality under other market conditions.
Key ideas
- A futures spread trades the price difference between contracts with different expiries on the same underlying.
- A spread order book executes both contract legs together, avoiding the risk of one leg filling first.
- The article’s two BTC and ETH snapshots showed many books quoted at the minimum one-tick width.
- Spread orders can help traders roll a hedge or cash-and-carry exposure to a later expiry.
- The reported liquidity evidence is limited to brief observations from one exchange.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.