Arbitrage Case with 1,1% Spread and Favorable Funding

The futures screener showed a price difference between the spot and futures markets for the MPC token on the Gate exchange.

The average spot purchase price was $0.297.

The average short position price was $0.3003.

It’s important to note that there was a substantial funding rate, which was applied every 4 hours and became the main source of profit.

When the prices were roughly equalized and the funding rate decreased, the client decided to close the trade.

The short position, along with the funding rate, brought in $37.93.

The cost of the tokens on the spot market resulted in a loss of $2.49.

The entry amount for the short position was $600.6, and $593.99 was spent on the spot market. The total investment was $1194.6.

The final profit amounted to: $37.93 - $2.49 = $35.44.

In percentage terms, that’s 2.96%.

Summary and key points:

1. Why we decided to enter the trade: a) The spread between the spot and futures prices. We were able to enter with a spread of 1.1%, which is a good indicator.

   b) A good funding rate. Actually, with such a spread, any positive funding rate would have been acceptable, but here, the high funding rate contributed to an excellent total profit.

   c) Price convergence. There are tokens that take a long time to converge in price, such as NKN. The token in this case had not been observed in the screener previously, which suggests that a price convergence might happen soon. By regularly using our screener, you will get to know which tokens take a long time to converge and can avoid such trades.

2. We entered and exited the trade in parts.

3. What we made money on: a) Price convergence resulted in just over 1%.

   b) The funding rate (fandling) earned nearly 2%.