Opening Positions by Coin Quantity, Not by USDT Value

Short Explanation

How to Do It Correctly

Without going too deep into mechanics, every arbitrage trader should remember: in Spot–Futures and Futures–Futures strategies, positions must be opened with the same number of coins, not with the same value in stablecoins (USDT, USDC, USD1, etc.).

Example of Correct Usage

Let’s say we have Exchange A and Exchange S, with 100 USDT on each.

Coin AS is traded on both exchanges. A spread has formed between spot on Exchange A and futures on Exchange S. Trading pairs: AS/USDT and ASUSDT respectively. The spot price on Exchange A is 9 USDT, and the futures price on Exchange S is 10 USDT.

We want to buy AS on spot (Exchange A) and open a short on Exchange S.

✗ Incorrect approach: Buy coins for 100 USDT on Exchange A and open a short for 100 USDT on Exchange S.

✓ Correct approach: Buy 10 AS coins on Exchange A and open a short for 10 AS coins on Exchange S.

Detailed Explanation

If you ask what Spot–Futures arbitrage is, the answer is usually: buy a token on spot and sell it on futures. The same logic applies to Futures–Futures arbitrage. While this answer is generally correct, it hides a mathematical inaccuracy that beginners often overlook.

The Core Idea of Futures Arbitrage

It is crucial to understand that arbitrage is not trading the direction of price — it is trading the price difference. The main goal when opening a position is maintaining delta-neutrality. This means that changes in the asset price should not affect your total balance.

We open a long position (or buy on spot) and open a short position on the same coin. The spread is k%.

• Scenario 1: The coin rises by N%, and the spread remains k%.

We lose on the short exactly as much as we gain on the long (or spot).

• Scenario 2: The coin falls by N%, and the spread remains k%.

We lose on the long (or spot) exactly as much as we gain on the short.

Therefore, we do not care about price direction — only the spread matters.

Example of the Mistake

Let’s imagine the following situation:

The spread is 10%.

• Scenario 1: The coin rises and converges at 150 USDT.

• Spot profit: 110 × (150 − 100) = 5500 USDT

• Futures loss: 100 × (110 − 150) = −4000 USDT

• Net result: 1500 USDT

• Scenario 2: The coin drops to 60 USDT and the spread converges.

• Spot loss: 110 × (60 − 100) = −4400 USDT

• Futures profit: 100 × (110 − 60) = 5000 USDT

• Net result: 600 USDT

Now profit depends on price direction. If price rises — you earn more. If price falls — you earn less. If the price drops sharply, your initial spread advantage shrinks significantly. After factoring in funding, fees, slippage, and possible incomplete convergence, the trade may even become unprofitable.

Example of the Correct Trade

Same scenario, but now we allocate equal coin quantities:

• Scenario 1: Price rises to 150 USDT.

• Spot profit: 100 × (150 − 100) = 5000 USDT

• Futures loss: 100 × (110 − 150) = −4000 USDT

• Net result: 1000 USDT

• Scenario 2: Price drops to 60 USDT.

• Spot loss: 100 × (60 − 100) = −4000 USDT

• Futures profit: 100 × (110 − 60) = 5000 USDT

• Net result: 1000 USDT

In this case, it does not matter where the price moves. Regardless of direction, you lock in the initially calculated profit (1000 USDT). Even if the price drops sharply, you can be confident that fees, funding, and other risks will not eliminate your spread advantage.