Futures arbitrage screener
The price of one and the same asset can differ between the spot and futures markets even at the same moment. Comparing the two shows which side offers the better terms for buying and for selling, and what the gap between the markets could be worth. The funding rate is a further factor shaping the final return on the position.
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Where the gap between the spot and futures price comes from
The spot and futures markets for one asset operate as separate trading segments. Each has its own structure of supply and demand, so the price of the asset can differ between them.
When a futures contract trades above the spot price, that state of the market is called contango. When the contract is below the spot price, it is backwardation. The difference between the two prices is the basis. Its size and direction show how the two markets currently stand relative to each other.
One of the mechanisms that pulls perpetual futures back towards spot is the funding rate. It provides for periodic settlements between participants holding opposite positions. Which way the payments flow depends on the value of the rate and the terms of the contract. That creates an economic incentive which can help close the price gap.
The basis is not a constant. It can shift with market volatility, news events, liquidity and the balance of supply and demand.
How arbitrage opportunities are assessed
Setting a spot position against a futures position makes it possible to assess price gaps without depending directly on which way the underlying price moves. Two opposite positions in the same asset are taken: a change in the value of one is offset to a degree by a change in the other, and the outcome depends on how the basis, the fees and the funding rate develop.
Contango: the futures price is above spot.
The classic arbitrage model buys the asset on the spot market and opens the opposite position on the futures market. As the basis narrows, the price gap can produce a positive result. The funding rate is a further factor: when it is positive, it is usually the short side that receives it.
Backwardation: the futures price is below spot.
Here the combination is reversed: a short position on the spot market and a long position on the futures market. A narrowing negative basis can create an additional price effect. When the funding rate is negative, it is usually the long side that receives the payments. Whether this model can be used depends on the availability of spot borrowing or on already holding the asset.
Unlike classic cross-exchange spot arbitrage, this model does not require the asset to be moved between venues. Where different exchanges are used, however, the allocation of capital, the margin requirements and the execution terms of each one all have to be taken into account. More on the neighbouring approach: spot arbitrage.
What the table shows
Basis — the relative deviation of the futures price from the spot price. It shows how the two markets currently stand.
Net basis — the price gap assessed with the applicable trading fees taken in. Reading this figure means allowing for the cost of opening and closing both positions.
Funding, APR — the current effect of the funding rate expressed on an annual basis. The rate for the individual period and the time to the next settlement are shown alongside. The figure reflects current conditions and is not a forecast of future payments.
From basis and from funding — the separate components of the calculated result. The first relates to the change in the price gap, the second to the funding payments over the holding period. Showing them separately makes the contribution of each one visible.
Total and APR — the combined figures for the holding period selected. Their values depend on the period set and on current market parameters.
Within one venue and between exchanges
Switching the mode of analysis determines which trading directions the table compares.
One exchange — the spot and futures markets within a single venue. This simplifies organising the positions and managing the margin, since both operations take place on one platform.
Between exchanges — spot and futures offers from different venues compared against each other. This surfaces wider price gaps, but it calls for capital to be allocated separately and for the individual terms of each platform to be taken into account.
Factors that shape the outcome
How orders fill. Reference prices do not always match the prices at which an order actually fills. Assessing an opportunity means allowing for liquidity, order book depth and possible slippage, particularly for assets with limited market activity.
Changes in the funding rate. The rate is revised in line with the terms of the contract and current market conditions, so its present value is no guarantee that a similar level will hold later. A change in the rate can alter both the direction and the size of the additional payments.
Margin requirements. Holding opposite positions reduces how far the whole construction depends on price direction, but it does not remove the risks tied to margin requirements and to liquidation of the futures leg. Judging how robust the construction is means allowing for the size of the margin, the leverage used and possible changes in market parameters.
Time to realisation. Unlike contracts with a fixed settlement date, perpetual futures have no set maturity. Whether the basis narrows depends on market conditions and is not guaranteed within any particular period. Assessing the potential result therefore means weighing not only the current size of the gap but how long the positions may have to be held.
Methodology and principles of analytical processing
Forming and structuring the data
The analytical system brings disparate market information together into a single structure, accounting for the specifics of trading directions and the individual characteristics of each platform. That keeps the presentation consistent and the key parameters comparable.
Criteria for forming the results
Forming the analytical selection takes into account the completeness, availability and reliability of the source information. Parameters that meet the established processing and confirmation criteria are included in the calculations. Insufficiently substantiated values are not used in the final results.
Currency of the analytical information
The information presented is kept current through regular refreshing and reconciliation of the analytical parameters. How often that happens is determined by the nature of each category of data and the way it is processed.
Frequently asked questions
How is this different from funding arbitrage?
In funding arbitrage the main source of potential return is the difference in funding rates between exchanges. Price gaps between the spot and futures markets are not the determining factor there.</p><p>In the model described here, the basis is what matters: the difference between the spot and futures prices. The funding rate is a further factor that can add to or subtract from the result.</p><p>The two approaches can be combined within one strategy. An opposing futures position, for example, both offsets the price risk of a spot purchase and allows the funding payments to be taken into account.
Do assets have to be moved between exchanges?
No. The spot and futures positions are opened independently of each other, and the margin required sits on the relevant venue. The model therefore does not require moving the asset between exchanges, waiting for network confirmations or allowing for withdrawal restrictions.</p><p>That sets it apart from classic cross-exchange spot arbitrage, where transferring the asset can be a separate stage of the operation. The fees for opening and closing the positions, and any other costs of each venue, still have to be taken into account.
What counts as a normal basis?
The size of the basis depends on the liquidity of the asset, the activity of participants and current market conditions. On large, liquid markets the price gap usually stays relatively small, and on its own it does not indicate an arbitrage opportunity.</p><p>A wider basis may be worth looking at more closely. Its size does not guarantee a positive result, however: trading fees, the volume available, order book depth and possible slippage all have to be taken into account.</p><p>Unusually high values deserve particular care. They can stem from thin liquidity or from limited volume available at the prices shown. What matters in the analysis is therefore not only the percentage gap but whether both positions can be filled in comparable size.
Why is funding negative on some rows?
A negative value means the current funding rate creates an additional cost for the position in question. This is not an error: the direction and size of the payments depend on current futures market conditions.</p><p>The price gap between spot and futures can still be of interest even when the funding effect is negative. In those cases the “From funding” figure shows the additional cost, while “Total” reflects the combined effect of basis and funding over the holding period selected.
Where does the price data come from?
The analysis uses market figures for spot and futures instruments taken from the sources the trading venues make available. The comparison uses the relevant price reference for each market, which makes it possible to assess the gap between them.</p><p>The information is refreshed on a regular basis, with the particulars of each category of data taken into account. Using the tool does not require connecting a trading account, providing API keys or registering.