Note: Nothing expressed below should be considered financial advice. This is just a suggestion so that users can learn more about the trading strategy. Users are always encouraged to do as much research as possible before executing any trade. The information below is not intended to represent guaranteed returns, and BitMEX is not responsible if your trades do not perform as expected.
Making money with cryptocurrencies, especially derivatives, is not always simple. That’s why we’ve launched “BitMEX Alpha,” a series where we share trading secrets about potentially profitable opportunities on BitMEX.
This time we share platform-based trading opportunities, including buying spot and selling perpetual futures contracts, especially MATIC (Polygon) and LINK (Chainlink).
How does it work? The contract discussed below has a high funding rate (buyers pay sellers every 8 hours), which means that the trader who sells the contract should receive a relatively higher funding amount.
Let’s dive in.
What’s on the table?
Below is a breakdown of the funding rates for MATIC and LINK on BitMEX.
|
token |
strategy |
Recent funding rates (at time of writing) |
APR (based on latest funding rate) |
|
Matic |
long MATIC_USDT (dot)
|
0.0959% |
105.0% |
|
link |
long LINK_USDT (dot) short LINKUSDT (frequent) |
0.0780% |
The right-most column, APR (Based on Latest Funding Rate), shows the annual return you can earn from basic trading for each token.
How do you execute on an opportunity?
- Buy (long) tokens spot or in conversion.
- Sell (short) the same amount of tokens as the perpetual contract.
- IMPORTANT: Track your token’s funding rate. here.
- If you think your funding rate will turn negative for an extended period of time, cancel the transaction.
For a step-by-step guide to perpetual contracts and spot-based trading, see “2. Swap Trading and Spot Trading”. article.
What is the profit potential?
It is impossible to determine. accurate The returns on these trades (since they depend on the funding rates which change every 8 hours) are much higher than what we usually see on the contracts mentioned!
This means you can potentially earn more profits by paying out your funds.
What should I consider?
- Exit and entry costs (e.g. trading fees and slippage) for both trades.
- There is execution risk when simultaneously trading spot and perpetual contracts, especially during volatile market periods.
- To purchase Spot, you need USDT (Tether). For perpetual contracts, additional USDT is required as margin.
- Taking liquidation risk into account, you can trade up to 20x for the MATICUSDT perpetual contract and up to 33x for the LINKUSDT perpetual contract. If the market price rises above the liquidation price, your position may be liquidated, leaving you exposed to an unhedged spot position. If you choose to use high leverage for your trading, you should monitor market conditions closely and top up your wallet to meet margin requirements. Alternatively, you can choose to trade with 1x leverage to avoid liquidation risk.
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