How Bearish Bitcoin Calendar Spread Trades Work

Short BTCUSDt September futures contracts + Long BTCUSDt perpetual swaps (OKX)

This trade will work the best if prices go down or sideways between now and settlement, here are the possible outcomes for this spread trade:

If prices go down slightly then the spread is likely to close faster and funding rates are likely to decrease. This could result in substantial profits.
If prices go down substantially, then the spread could go negative and funding rates could also be substantially negative, leading to increased profit margins.
If prices go sideways then the spread will close at or before settlement time, and funding rates are likely to remain near the average for the last 90-days. This could result in modest profits.
If prices increase slightly then the spread will still close at the settlement date but could temporarily increase, and funding rates may be higher than the 90-day average. This could result in either a slight gain or loss, or breakeven profits.
If prices increase substantially you may lose substantially on this trade because of increased funding rates and increased time for the spread to close.

Example:
Short 10 BTCUSDt Sept 29th futures contracts at 29,574 + Long 10 BTCUSDt perpetual swaps at 29,330

Initial Costs & Profits:
Gross profit from the spread for 10 BTC = $244 x 10 = $2,440
Trading fees = 0.04% of $587,000 = $235 (actual fees paid when exiting will depend on market price)
Net profit after trading fees = $2,440 - $235 = $2,205

Breakeven funding rates:
If spread = 0 in 20 days
f x 293,500 × 10 × 20 = 2,205
f = 2,205/(293,500 x 20)
f = 0.0375%

If spread = 0 in 30 days
f x 293,500 × 10 × 30 = 2,205
f = 2,205/(293,500 x 30)
f = 0.0248%

If spread = 0 in 46 days
f x 293,500 × 10 × 46 = 2,205
f = 2,205/(293,500 x 46)
f = 0.0163%

(Based on these calculations, as long as the average daily funding rate is below 0.0163%, then you will breakeven or earn a profit, assuming your maker fees are 0.02% per trade)

Based on the 90-day average daily funding rate of 0.01204%, your net profit (x) would be as follows:
If spread = 0 in 20 days:
x = 2205 - 0.01204% x 293,500 x 20
x = $1,499 (+0.255%)

If spread = 0 in 30 days:
x = 2205 - 0.01204% x 293,500 x 30
x = $1,146 (+0.195%)

If spread = 0 in 46 days:
x = 2205 - 0.01204% x 293,500 x 46
x = $573 (+0.098%)

(Assuming you use 100x leverage on these trade, you would multiply your percentage profits by 100, leading to a profit of 9.8% to 25.5%. When using leverage, You must ensure that your margin does not drop below the maintenance margin requirements if the spread temporarily increases or it will result in a forced liquidation.)

Note

Slight correction to this formula, result unchanged (Removed unnecessary x10)

Breakeven funding rates:
If spread = 0 in 20 days
f x 293,500 × 20 = 2,205
f = 2,205/(293,500 x 20)
f = 0.0375%

If spread = 0 in 30 days
f x 293,500 × 30 = 2,205
f = 2,205/(293,500 x 30)
f = 0.0248%

If spread = 0 in 46 days
f x 293,500 × 46 = 2,205
f = 2,205/(293,500 x 46)
f = 0.0163%

Intuit

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Intuit

I no longer post here. Find me on x.com/intuit_trading

Also on: