Crypto Basis Trading.
What is crypto basis trading?
Crypto basis trading is an arbitrage strategy in which a trader profits from the difference between the spot and futures market price.
It originated in the commodity markets (grain) where it is generally used to hedge against bad weather but basis trading can also be a profitable strategy in crypto trading. In the rest of the article we refer to the basis as the difference between the future price and the spot price of the same coin.
A crypto basis trading example.
Futures are a type of derivative contract in which two parties agree to exchange an asset — or cash equivalent — at a specific price and date (maturity date).
On the maturity date the future price and the spot price will be the same.
We have previously defined the basis as the difference between the futures price and spot price.
Basis (B) = Future price (F) – Spot price (S).
Let’s assume the current date is January 1 2024 and BTCH24 is the future contract on BTC/USD expiring on March 2024. It has 90 days until expiry, i.e. 0.25 years.
F = $30,250
S = $30,230
t = 0.25 years
Basis = ($30,250 / $30,230 – 1) / 0.25 = 0.26% annualized YTY
By selling the basis ( selling the future and buying the spot ) for the March 2024 contract you can lock in a profit of 26%.
The interest paid to finance the spot position is called the cost of carry. (COC = interest rate for margin or founding rate for perpetual).
At maturity your PNL = BASIS – COC.
If you want to read more about this strategy click here.
ShieldTrade: Python crypto Excel Add-in.
ShieldTrade is a Python Excel add-in that brings the best Python trading library used by quant traders and hedge funds to Excel.
Python Excel add-ins serve as a bridge between the analytical capabilities of Python and the intuitive interface of Excel, so that traders can automate processes, create custom solutions, and visualize market data effectively.
You can now use expert tools without coding skills as simple Excel formulas.
Crypto Excel sheet for python trading bot.
Our mission is to make crypto asset data and professional Python trading libraries available to anyone with basic Excel skills.
So, after selecting and testing the best Python trading code for a strategy, we make it available in Excel.
The crypto Excel sheet powered by ShieldTrade is now your user interface and allows you to change the parameters of the crypto strategy. But there are even more advantages to using Excel as an UI. For instance, all the normal excel functions such us formulas or macro are still available and allow you to customise your crypto excel sheet perfectly to your needs.
ShieldTrade: crypto algo trading platform
With ShieldTrade you can become a professional trader and create all kinds of arbitrage strategies.
A new trading logic: “Quote and do something when filled” is now available for all crypto traders with more than 100 exchanges supported.
- Arbitrage trading. Quote a symbol and hedge the same symbol on another exchange.
- Basis trading. Quote futures and hedge spot on another exchange.
- Grid trading. Quote a symbol and change the quotes when it is filled.
Crypto Excel sheet for Crypto basis trading.
In Crypto basis trading we want to profit from the difference between the spot and futures crypto price and the new logic, now available thanks to “Python in Excel”, is perfect for us.
In this video you can see a top basis trading algo where ShieldTrade can quote a price for a symbol on an exchange (Bitmex. BTC/USD Future). When the algo is filled, it hedges its position with another symbol and another exchange (Binance. BTC/USDT Spot).
Is basis trading profitable?
Basis Trading is a profitable market niche that is difficult for non algo traders to access. With ShieldTrade you can benefit from limit orders, which means lower fees for taker orders, and gain the spread.
When ShieldTrade is hosted on the same server as your exchange, you can compete with the most sophisticated hedge funds.