Whether experienced or not, traders like to use a range of strategies to generate returns on their investments. Now, OKEx, the global cryptocurrency exchange based out of Malta is giving its customers an insight into a common arbitrage strategy that can help them to profit.
Known as calendar spread arbitrage, the method allows traders to deliver a return on investment (ROI) by taking advantage of the value of a particular digital asset across two different futures contract expiry dates.
This means traders can profit whether the market is in a wider bull or bear cycle.
“Futures price reflects the market sentiment of the subject’s price. In the futures market, a different settlement time contract of the same token will differ. For example, at writing time, the mark price of BTC quarterly contract is USD 10,033.3, while that of the bi-weekly contract is USD 9,973.88,” the post says.
“To earn a guaranteed profit from calendar spread arbitrage, spread must fluctuate within the two positions the trader takes, which can be predicted from historical trading records.
“This way, you can guarantee a stable profit despite market volatile. The benefit of a futures spread is that the trader has taken two positions. This allows them to earn a guaranteed profit from the exercise of both positions.”
An easy way to get a solid ROI?
What it means is that the return on investment you can get depends on the spread of different contracts. To simplify the strategy, traders who are unfamiliar with the method can use long arbitrage when the market is on the up (in a bull cycle), and short arbitrage when it’s in a downturn (bear market cycle).
A spokesperson for OKEx, says calendar spread arbitrage gives customers another option in their trading approach and strategy and was another tool that could be used on its platform to help them generate a solid ROI.
However, despite the potential rewards from investing they were keen to highlight the risks involved with trading digital assets, and said that whether you were new to trading, or experienced, you should always ensure you have a risk management plan in place to limit any financial losses.
“However experienced you are to investing, you must always know when to exit a trade, and have a damage mitigation plan in place to reduce any financial losses,” the spokesperson said.