Binance perpetual funds rate adjustment (currently bull market annualized 100%)
Author: The grass, Created: 2020-12-29 14:57:31, Updated: 2023-09-26 20:53:09
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Permanent contracts and funding rates
The first coin-circle contracts were only exchange-rate contracts, but later BitMEX innovations introduced perpetual contracts, which are very popular and now mainstream exchanges mostly support perpetual contracts.
The longer the delivery date, the greater the price fluctuation, the greater the deviation between the contract price and the spot price, but on the day of delivery, the price is forced to settle at the spot price, so the price always returns. Unlike the delivery rate, the fixed-term contract can be held forever, and requires a mechanism to ensure that the contract price and the spot price are consistent, this is the capital rate mechanism. If the price is volatile for a period of time, many more people do a lot, it will lead to a permanent price higher than the spot price, at which time the capital rate is generally positive, the more you want to do, the higher the deviation is, so that the price of the compound tends to fall.
Interest rate and profit analysis
The capital rate is positive most of the time, and if you do a blank permanent contract, do a lot of cash, hold for a long time, you can theoretically get a positive capital rate gain in the long run without the fall in the price of the currency.
Binance provides a history of the capital rate:https://www.binance.com/cn/futures/funding-history/1Here are a few examples:
The average exchange rate for the currency in March 2021 was:
You can see that the average rate of interest in many currencies is above 0.15% (due to the recent bull market, the rate is too high, but difficult to sustain). According to the recent earnings calculation, the daily rate of return will be 0.15% * 3 = 0.45%, not including the return on annuity at 164%; considering the spot hedge, double the leverage of the futures, plus the disadvantages of losses, premiums, and flat positions, the annualisation should be at 100%. The withdrawal is almost negligible.
Risk analysis and avoidance
Negative rate
The minimum rate can be up to -0.75%, if it occurs once, the loss is equivalent to the gain of 75 times the rate of 1 million, although the currency of the average rate has been filtered, but there are inevitable unexpected events. The solution in addition to avoiding new coins and demon coins, the most important is to diversify the hedge, if the hedge is more than 30, the loss of one coin will only account for a small part.
Changes in premiums
Generally, positive rates represent a permanent premium on the spot commodity, and if the premium is high, it is possible to earn a certain premium return, of course the strategy has been held for a long time, so it will not eat this part of the profit.
The risk of a contract bust
Due to the diversified hedging, this part of the risk is much smaller, for example, with a permanent double leverage, the possibility of a bull market will only occur unless the price increases by 50% overall, and due to the cash hedge, there is no loss at this time.
Long term bear market
The bull market rates are mostly positive, and many coin averages can exceed $2,000, with occasional high rates. If the market turns into a long-term bear market, the average rate will decrease, and the probability of a large negative rate will also increase, which will reduce earnings.
Strategic thoughts
1. Automatically filter the currency or manually specify the currency, refer to the historical capital rate, and trade above the threshold. 2. Obtaining the current rate, exceeding the set threshold, starting to hedge futures spot at the same time, fixing a certain value. 3. If the price of a single currency rises too much, the strategy can be automatically leveled to avoid the perpetual risk of too high a price. 4. If the rate of a currency is too low, a flat rate is required to avoid being charged. 5. The strategy does not require the speed of the opening position, the opening position is settled using the iceberg assignment, reducing the shock.
Summary
Use a rate strategy that is low in overall risk, large in capital capacity, stable and not profitable. It is suitable for those seeking low-risk arbitrage. If all funds are dormant, this strategy can be considered.
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alphaStrategy00XIs that what you're talking about?
chinazyxHow can this strategy be bought?
The grass /upload/asset/1b53bb88df9fb3c1070.csv
Orc quantifiedI just wrote this strategy two months ago, and it's actually a monthly rate strategy with an annualization of 100%; probably thanks to the recent heating up of the market, the rate is higher.
daniaorenI've been working on this lately, and this is actually a stable income that's not a problem, and I'm trying to improve it, and I'm looking at two things. One is a multi-exchange, if there is a low-cost money flow option between any exchange, you can find the exchange set with the highest rate. One is to look for ways to leverage, for example, to hedge against permanent holdings by borrowing cash or futures contracts. I don't know if it's actually being done, if there's any other optimization ideas.
excmSo if you're looking at the U.S. hedge fund utilization rate, which is going to halve, which is going to be only 5 to 8 percent, then the U.S. price is going to go from about 7 percent last year to 6.4 percent now, and you're thinking, is this a profit or a loss?
xukittyI learned a lot from the grasshopper, thank you.
The grassThe strategy is to lay back and save some money, not make a profit.
The grass https://www.fmz.com/bbs-topic/6609
The grassYes, the rates have been too skewed lately, and without optimizing the annual rate, it could be 30-40%.
daniaorenThe stock market is going round and round, and the interest rates are still too high, not too good to leverage.
The grassThere is also room for optimization in the chosen currency, which can be positioned in higher premium and higher rate currencies.
The grassLeveraging cash is a good idea to increase capital utilization as long as the benefits outweigh the costs.
The grassIt's a big loss in terms of BTC.