STRATEGIES
Basis Trading
Definition
Basis trading exploits price differences between spot and futures markets by simultaneously buying one and selling the other, profiting as the basis (price difference) converges to zero at expiration.
Example
Example
If ETH futures trade at $2050 while spot is $2000, buy spot ETH and short futures, profiting $50 per ETH when they converge at expiration.
Risks to Consider
Risks
- Basis risk
- Funding costs
- Liquidity risk
- Execution timing
