After we observed a widening of the basis over the last weeks, we decided to add another BTC cash & carry trade, this time using the CME-listed futures contract. We switched our broker for this trade, which has the benefit are substantially lower margin requirements.
Here are the trade details:
- 30 Jul: Sell 1 CME August BTC contract at $11,255
- 30 Jul: Buy 5 spot BTC on Bitstamp at $11,047 including fees
At the time of trade entry the futures contract implied an annualized funding basis of around 30%.
- 22 Jun: Sell 2 July 2020 ICE Bitcoin futures contracts at $9,482.5
- 22 Jun: Buy 2 spot BTC on Bitstamp at $9,415.35
- 14 Jul: Rollover Jul-Aug ICE Bitcoin futures at $85 (+2 July at $9,210, -2 August at $9,295)
- 30 Jul: Sell 1 Aug 2020 CME Bitcoin futures contract at $11,255
- 30 Jul: Buy 5 spot BTC on Bitstamp at $11,021
PL update as per Friday, 31 Jul
- Realized PL on the Jul 2020 ICE Bitcoin futures contract = ($9,210 – $9,482.5) * -2 = $545
- Settlement price of the Aug 2020 ICE Bitcoin futures contract: $11,480
- Settlement price of the Aug 2020 CME Bitcoin futures contract: $11,610
- Bitstamp BTC spot price at 5pm ET: $11,354
PL = (Spot OTE – Futures OTE) * Lots + Total Realized PL
- ICE PL = [($11,354 – $9,415.35) – ($11,480 – $9,295)] * 2 + $545 = $52.3
- CME PL = [($11,354 – $11,021) – ($11,610 – $11,255)] * 5 = -$110
Thus, the combined gross PL is $52.3 – $110 = -$57.7
We are now 39 days into our ICE trade and 1 days into our CME trade.
The net PL includes the following:
- 0.25% one-off charge at Bitstamp when buying spot BTC
- Futures commission: $4 per lot per side (rollover trades will be included)
- Funding charge (spread) on futures margin: We assume a margin funding charge (spread) of 0.25% per year (the actual number depends on your broker). The initial margin requirements also depend on your broker. We assume 200% initial margin for a short position on ICE, and 70% initial margin for a short position on CME.
Note that this is only an idea, not advice of any kind as pointed out in our Disclaimer.