On the evening of November 14th, AICoin researchers conducted a live graphic and textual sharing session on "Core Logic of Fee Rate Arbitrage" in the AICoin PC End-Group Chat-Live. Below is a summary of the live content.
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I. Using Arbitrage Advantages
1. AICoin's Arbitrage Section
2. The Biggest Feature of Arbitrage: Helping You Earn Money Steadily
3. Sharing of Friends' Arbitrage Earnings
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Second
Third
4. Reasons for Using Arbitrage
There are many recent opportunities for rates.
II. Authorizing OuYi for Funding Rate Arbitrage
1. OuYi's Quick Authorization
Step 1, authorize by clicking on More - Authorization;
Step 2, first connect from AICoin to your exchange, for example, authorize the OKX account through AICoin link to OKX;
Step 3, you can click on Quick Authorization - convenient and simple, after clicking, the account will be connected directly;
(If you cannot open the OKX webpage, please [update the version] or click [Contact Customer Service] in the lower right corner for assistance)
Step 4, log in to the OKX account and authorize;
Step 5, after logging in, agree and use immediately.
Benefits of OuYi's Quick Authorization:
(1) You can authorize your AICoin account to your OKX account, and use all trading functions in the AICoin software!
(2) Authorizing OKX's FastAPI to AICoin allows you to receive 10 AI analyses from VIP senior managers for free, and there are other tasks that can earn you free small A analysis times; the ability of AI analysis data can identify the best buying and selling points, help you analyze market trends, and help you interpret K-line.
Complete tasks to receive free small A analysis times
2. Understanding Funding Arbitrage
(1) Why Can Fee Rate Arbitrage Earn Steady Returns:
Fee rate arbitrage, perpetual fee rate arbitrage, refers to conducting two trades in opposite directions, with equal quantities and offsetting profits and losses in both spot and perpetual contracts, with the goal of earning funding rate income in perpetual contract trading. In other words, there is equivalent income between the contract and spot, one side makes money while the other side loses, both positions are averaged, and then only the funding fee is earned.
(2) Concept of Funding Rate
The funding rate is an important mechanism for perpetual contracts to anchor spot prices, used to balance long and short sentiments. When the funding rate > 0, at settlement, longs pay funding fees, and shorts receive funding fees; when the funding rate < 0, shorts pay funding fees, and longs receive them. Payment or receipt of funding fees = nominal value of holdings * funding rate. In simple terms, the purpose of funding fees is to maintain an important regulatory means for average funds, with the profitable party in the market compensating the losing party.
(3) Rules for Collecting Funding Fees
Funding fees are generally collected every 8 hours, 3 times a day. The settlement collection time varies for different exchanges. If positions are closed before the settlement time, no funding fees need to be paid or cannot be received.
In summary: Fee rate arbitrage requires attention to funding fees.
(4) Example Explanation
Arbitrage is achieved by earning funding fees from perpetual contract settlements as income. If only one perpetual contract position is opened, it is very likely that the contract losses will far exceed the funding fee income at settlement, so a position in spot should be hedged.
For example:
If a perpetual contract is short 1 BTC, then 1 BTC needs to be bought in spot.
If the BTC price rises, it will result in a loss in the contract position and a profit in spot.
If the BTC price falls, it will result in a profit in the contract position and a loss in spot.
From the price calculation formula, a balance of profits and losses has been achieved, and there is no longer concern about the price fluctuations, allowing for the collection of perpetual fees.
Simulation:
When the funding rate is greater than 0
Currently, the funding rate for Binance BTC perpetual is 0.17%. If Zhang San sees that settlement is in just over an hour, and judges that the funding fee will continue to be > 0, Zhang San shorts 2 BTC in BTC perpetual and simultaneously buys 2 BTC in spot.
So, over 1 hour later at settlement, Zhang San's short position will receive funding fee income: 2 * 0.17% = 0.0034 BTC.
The calculation of income here is: nominal value of holdings * funding rate.
When the funding rate is less than 0
If a few days later the funding fee starts to decrease, or even becomes negative, close the position and exit this arbitrage.
If the funding fee is negative, and if you have coins on hand, the appropriate operation at this time is: go long in perpetual, sell coins (if you don't have spot coins to sell, you can sell through borrowing).
Reverse arbitrage, selling through borrowing, is to amplify the use of funds through various opportunities.
Key Points of Arbitrage
3. Opening the Practical Operation of Arbitrage
AICoin's arbitrage interface
Selecting combinations of 2 standards: 7-day annualized and holding value
Example: In the figure below, for STORJ, you can see that its 7-day annualized rate is high, and the holding value is over ten million.
Click to earn coins immediately.
Enter this interface, input the arbitrage capital and set the price difference rate, which can be referenced from the recommended opening price difference rate.
Select the corresponding price mode to avoid trading slippage issues.
Open the arbitrage position.
4. AICoin's automatic coin-earning section selects arbitrage combinations Small tip
(1) Find high holding value, at least in the tens of millions of dollars (indicating good market liquidity).
(2) Good 7-day annualized rate, at least positive (ensuring the probability of profit).
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Unlock more combinations by opening an arbitrage membership. The advantages of arbitrage are stable returns and relatively low risk. Click the link below to open and experience: https://aicoin.app/vip/arbtool
Bonus: Authorize OKX's FastAPI to AICoin and receive 10 AI analyses from VIP senior managers.
Complete tasks to receive free small A analysis times
Recommended Reading
Advanced EMA Strategy Automated Trading: The Secret Weapon for Doubling Wealth
Ichimoku Trading Method: Advanced Strategy and Practical Application
SAR Capturing Trend Markets, 3 Signals to Grasp Reversal Points
For more live content, please follow AICoin's "News/Information-Live Review" section, and feel free to download AICoin PC End
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