How To Trade The Basis

Image for post
Image for post

Trading the basis is a well-known trading strategy requiring a spot and regulated futures market. Conveniently, ErisX has both on one, innovative platform.

Basis trading is a type of arbitrage that involves simultaneously taking offsetting positions in the spot and futures market of the same commodity to benefit from differences in pricing. The difference is called the basis. While we do not give investment advice, we would like to give an example of what we are describing; If a trader was able to buy Ether at a price of $395 and was then able to sell the equivalent amount of futures contracts at $398, they could lock in a price differential with a profitable $3 basis per contract. (It is also possible to lose money if a positive price differential cannot be locked in.)

Our spot market currently offers trading in Bitcoin, Bitcoin Cash, Ether and Litecoin. Our futures exchange currently offers physically delivered Bitcoin contracts and (the first U.S. based) Ether contracts. Members sell futures contracts and use their Bitcoin or Ether holdings as collateral. A benefit to physically delivered contracts is avoiding potential risk of slippage that could occur in cash settled products where the spot price moves after settlement but before delivery.

In summary, ErisX is a unified platform for spot and regulated futures on cryptocurrencies. We provide price transparency, collateral efficiencies and a multitude of opportunities to express a view on the market, including trading the basis. We are passionate about building on our established-capital markets roots and work with individuals and institutional investors that value surveilled, fair and professionally-run market centers. We invite you to open an account with us at ErisX.

Written by

Improving the digital asset trading and investing experience.

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store