Contract arbitrage experts teach you how to avoid risks and achieve steady profits!
If you want to play with big funds, spot contract hedging is a trick. Perpetual contracts have to pay funding fees three times a day, which hides many arbitrage opportunities. How to operate? Simply put, it is to find two exchanges to see which one has a higher funding fee, and then open a short order where the funding fee is high and a long order where the funding fee is low. The price, margin and multiple are all set, one by one. In this way, the funding fee is in hand. As for the multiple, 5 to 10 times is the most suitable. Too high is easy to blow up the position, too low is not worthwhile, and frequent position adjustment fees are also expensive.
Let's talk about leveraged contract arbitrage, which is a good way to improve the utilization rate of funds. For example, if you have 10,000 U in your hand and borrow some U from the exchange, the daily interest rate of the handling fee is only 0.02%. Then, find a contract whose funding fee is not less than 0.03% in one day, and you can make money. However, as more people arbitrage, the funding fee will not be so high. I recently bought 1 BTC on the gate exchange with a leverage of 10,000 U, and then opened 1,000 BTC/U short orders on the bigone exchange. The daily funding fee can be 0.1% to 0.2%. Of course, you have to find currencies with high funding fees on your own. Some software can also help. The highest funding fee I have encountered is 6%!
Speaking of risks, slippage is a headache. The buying and selling prices on both sides must match, and generally the limit price commission is OK. Unless the market fluctuates greatly, there will be no problem. If you buy at a low price with leverage and open a short contract at a high price, you can still make some difference. When selling with leverage, setting the commission price a little higher than the stop loss price of the contract can also reduce slippage.
Another risk is loss. Generally speaking, if the price rises and you sell at the set price, you will not lose money. But if the price suddenly pulls back, the leverage is hit to the forced liquidation price, and the contract is forced to stop profit, then you may lose money. Therefore, when encountering a large pullback, it is best to close the position in advance, safety first!
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