Cryptocurrency Derivatives Series: Crypto Arbitrage Opportunity For The Day

The prime objective of derivatives instruments is to provide effective hedging vehicles, but now serve as benchmarks established by a trusted price discovery process which investors can rely upon. Such process of price discovery unfolding before our eyes, as there has been volatile swings observed, the competition between digital currencies at the different crypto-exchanges exist, and so is the case with the derivatives products as well such as CME BTCV2019.

Please be noted that the price difference as shown in the technical charts, BTCUSD at Gemini exchange is available at $8,297 levels (while articulating). Whereas, CME BTC Futures of October month contracts (BTCV2109)are trading at $8,345 level, with a mild dip about -0.12% from the previous session.

Thereby, we intend to exploit price differentials between Gemini and CME, decisively bet upon arbitrage opportunity.

Hence, by buying 5 bitcoins in the former and initiating 1 lot of short on the CME BTCV9 futures contract at the current level. 

Well, out of this trade idea,  we can "carry" the 5 bitcoins for cash settlement at the expiration date for the futures contract. The BTCV9 price is subject to the contract of 1-month tenor which is the cost of carry in addition to the other factors involved as well.

Please also be noted that the margins are to be maintained by the exchange based on volatility of the bitcoin price.