43 / 50
Relative value
What price difference does a cash-and-carry basis trade lock?
Spot-futures basis · Cash-and-carry basis
What it bets
When an expiring futures contract is rich or cheap against spot, holding to expiry lets the spread converge along the contract's own relationship.
How the rule is written
When futures are expensive enough versus spot to cover the cost of carry, buy the spot and sell the futures, and hold to expiry. When futures are too cheap, reverse the legs, which requires being able to borrow the spot. In crypto the match is a contract with an expiry date plus spot, not a perpetual with no expiry.
When it fails
Closing before expiry, while the convergence has not happened yet. Margin, borrowing, and rolling early eat the theoretical spread. If the definitions of the spot price and the futures price do not match, the basis has been calculated wrong.
Do not confuse it with
Funding is a scheduled payment on a perpetual. There is no expiry date on which it converges. A calendar spread is the difference between two expiry months, and it does not hold spot.