If you want to play with large funds, the strategy of hedging spot and contract is simply brilliant!
The daily funding fee for perpetual contracts, three times a day, is simply our little treasure for arbitrage. The specific operation is to keep an eye out and listen attentively, looking for price differences between two exchanges.
For example, if you find that the funding fee of exchange A is higher than that of exchange B, then quickly open a short position on A and a long position on B, making sure the price, margin, and multiples correspond. This way, you can hedge and easily pocket the funding fee.
Multiples, 5 to 10 times is the most suitable; too high risks liquidation, too low lacks flavor, and frequent adjustments incur fees, which is not worth it!
Let's talk about arbitrage with leveraged contracts; this is our magic tool to improve capital utilization. For example, if you have 10,000 USDT, you can borrow some USDT from the exchange with a daily interest rate of only 0.02%, it's almost like getting it for free.
Then, find a contract with a daily funding fee of no less than 0.03%, and the trade will be stable. However, now that more people are arbitraging, funding fees aren't as high as before. I previously used 10,000 USDT leverage to buy 1 BTC on Gate exchange, then opened a short position of 1,000 BTC/USDT on Bigone exchange, with daily funding fees ranging from 0.1% to 0.2%, quite nice.
Of course, finding coins with high funding fees relies on our own vigilance, and some software can also help; I once encountered a funding fee as high as 6%!
Speaking of risks, slippage can be quite a headache. The buying and selling prices on both sides must match; limit orders are quite useful unless there's a significant market fluctuation, otherwise, there generally won't be issues.
If you buy at a low price with leverage and open a short position at a high price, you can also earn some price difference. When selling with leverage, set the limit price a bit higher than the contract's stop-loss price to minimize slippage.
Now let's talk about the risk of losses. Generally, if the price rises and we sell at the set price, we won't incur losses.
But if the price suddenly pulls back, and the leverage hits the liquidation price, and the contract is forcibly liquidated, then it's going to be crying time.
So, when encountering a large pullback, we need to be smart and close our positions in advance; safety first! This contract arbitrage is like walking on a tightrope; we need to be cautious and steady to make big money!
Bull market strategy layout, spot market ambush opportunities, contract entry points, uncovering false information fog, discovering the real market, I am Cannon Brother, welcome to join!!!$BTC $ETH $BNB
