Bitmex futures trading

That means that as the price rises, their unrealised losses increase less quickly. Therefore, BitMEX shorts can use more leverage than they otherwise would if the contract used a linear contract structure. A market maker who is short cannot use their spot Bitcoin hedge as margin at the CME. As the price rises, their Bitcoin is worth more; however, those unrealised USD gains cannot be deposited as margin.

This makes shorting the CME contract very capital intensive. CME shorts need to be compensated via a higher basis for their implicit short volatility position. The CME intends to list a futures curve out to one year. The back end of the curve, due to a larger time value, will be illiquid when compared to the front months, and will trade at a very high basis. The table below stresses the portfolio on a large up and down move.

Both of these derivatives require additional margin. Depending on your cost of capital, a prolonged down move without any recovery could become very expensive. Another issue is the sizing of this trade. Otherwise you will always be over and under hedged. The below table illustrates this point.

As you can see, go big or go home. The below table stresses the portfolio on a large up and down move. Because you have positive gamma on the short BitMEX position, you will not face a doubling of margin requirements when the price falls. This spread trade is more capital efficient; however, I doubt whether BitMEX will frequently trade more expensive than the CME for reasons described above.

The CME does not trade over the weekend. Longs or shorts depending on the price action over the weekend, could be insta-rekt when the exchange reopens Sunday night US time. They are scared shitless about how to deal with underwater shorts. Imagine what will happen when an ETF finally is approved. BitMEX deals with gap risk via auto-deleveraging.

The CME at the present moment cannot employ a socialised loss feature. Instead, clearing members must pony up the cash. That is why they are being such scaredy cats. Depending on your broker, margin requirements for short positions could be extremely unforgiving.

This will push CME basis up even further, and make putting on the spread trade, described above, even more expensive. The different margin currencies and policies present many opportunities to transform what is a sure profit into a massive loss. However, owing to their difficulty, these spread trades will be juicy. For students of markets, this is an arbitrage opportunity of a lifetime.

The back end of the curve, due to a larger time value, will be illiquid when compared to the front months, and will trade at a very high basis. The table below stresses the portfolio on a large up and down move.

Both of these derivatives require additional margin. Depending on your cost of capital, a prolonged down move without any recovery could become very expensive. Another issue is the sizing of this trade. Otherwise you will always be over and under hedged. The below table illustrates this point.

As you can see, go big or go home. The below table stresses the portfolio on a large up and down move. Because you have positive gamma on the short BitMEX position, you will not face a doubling of margin requirements when the price falls. This spread trade is more capital efficient; however, I doubt whether BitMEX will frequently trade more expensive than the CME for reasons described above.

The CME does not trade over the weekend. Longs or shorts depending on the price action over the weekend, could be insta-rekt when the exchange reopens Sunday night US time. They are scared shitless about how to deal with underwater shorts.

Imagine what will happen when an ETF finally is approved. BitMEX deals with gap risk via auto-deleveraging. The CME at the present moment cannot employ a socialised loss feature. Instead, clearing members must pony up the cash. That is why they are being such scaredy cats.

Depending on your broker, margin requirements for short positions could be extremely unforgiving. This will push CME basis up even further, and make putting on the spread trade, described above, even more expensive.

The different margin currencies and policies present many opportunities to transform what is a sure profit into a massive loss. However, owing to their difficulty, these spread trades will be juicy. For students of markets, this is an arbitrage opportunity of a lifetime. Those who put in the time to perfect these strategies will profit handsomely. Skip to content Bitcoin is at a watershed moment. Settlement The first major difference between the two contracts is the underlying index.

Margin Bitcoin is a call option. I will now present two spread trades. Assume that you are a USD-based investor. The table below summarises what actions must be taken to ensure we meet margin requirements.