Knowledge · Strategies · Cash-and-Carry / Basis Trade

Cash-and-Carry / Basis Trade

Commodity trading (centuries old); crypto variant since the CME BTC futures launch in 2017
Market Neutral Evidence: Very strong weeks to months cryptofuturescommodities
6/10
Relevance for Botty
Spot long + dated future short with a fixed maturity. Locks in the annualized basis. Typically 5-20% APY on BTC quarterly futures.
Core concept
Dated futures (with a fixed expiry) often trade at a premium to spot (contango) due to leverage demand. Whoever buys spot and sells the future locks in the basis (future price minus spot) until expiry — historically 5-20% annualized in crypto, with spikes up to 50% in bull phases.
Relevance for Botty
Relevance Score 6/10
Hyperliquid has primarily perpetuals, no dated futures. CME BTC futures are accessible but require a TradFi broker. Variant: funding-rate arbitrage with a perp is the 'perpetual equivalent'. For retail crypto, perp funding arb is usually easier to implement.
Rules

Entry

  • Identify a quarterly future with positive basis (future > spot)
  • Compute the annualized basis: (F/S - 1) × (365 / days_to_expiry)
  • If annualized > threshold (e.g. 8%): open long spot, short future
  • Match USD notional sizes

Exit

  • Hold to expiry → automatic convergence to spot
  • Optional: roll over into the next quarterly contract if the basis stays attractive
  • Early exit when the basis converges to ~0 before expiry (profit realized)
Parameter
NameTyp. valueDescription
min_annualized_basis 8-10% Profitability threshold after fees
days_to_expiry 60-90 Shorter expiries have less yield, less risk
position_size_pct 10-30% Limit due to exchange concentration
Pros & Cons

Pros

  • Mathematically guaranteed convergence at maturity
  • No active management (set-and-hold)
  • Very high risk-adjusted returns historically
  • Regulated venues (CME) reduce exchange risk

Cons

  • Margins compressed after the ETF launch
  • Capital-intensive (both legs require collateral)
  • Spot delivery or payout incurs gas/fee costs
  • Early liquidation risk on strong moves (when using a perp as hedge instead of a quarterly)
Typical performance
apy
5-15% on average; 20-50% annualized in bull phases
notes
Securitize did 20.71% on Bitcoin carry with BUIDL. Currently (April 2026) the basis has compressed to ~5%, versus ~17% a year ago. A persistent effect, but margin-compressed post-ETF.
sharpe
~3-5 (very high with clean execution)
max drawdown
~1-3% on basis divergences
Bot suitability
Very good — once opened, little active management. Rebalancing logic is simple.
Background

Core idea

A quarterly future on BTC expiring in 90 days typically costs a few percent more than spot — that is contango. The reason: long speculators want leveraged exposure, market makers are happy to sell short, but only at a premium to compensate for the capital they tie up.

Whoever reverses the trade — buy spot, sell the future — locks in this premium. At expiry the future price converges to spot with certainty (cash settlement or physical delivery) → the premium is realized.

The math

Spot price:       S = $100,000
Future (90d):     F = $103,000
Basis:            F - S = $3,000
Annualized:       ($3,000 / $100,000) × (365/90) = 12.17% APR

You earn 12.17% annualized over 90 days — with zero directional risk, because the spot long and the future short hedge each other perfectly.

Historical performance

  • 2020-2022 bull phase: quarterly basis at times 20-50% annualized
  • 2022 bear: basis compressed to 0, at times backwardation (negative)
  • 2024 post-ETF: 15-30% back again
  • Currently (April 2026): ~5%, compressed, margins eroded by ETF access

Securitize case study: combined the trade with BlackRock's BUIDL fund as collateral (earning an additional 5% T-bill yield on the spot USDC) → 20.71% total APY. That is the state of the art for institutional basis trades.

Practical implementation

Institutional (CME futures)

  1. Buy spot BTC (Coinbase Prime, Galaxy, etc.)
  2. Sell a CME BTC quarterly future (via broker access)
  3. Hold to expiry
  4. Cash-settle

Retail (Binance/OKX/Hyperliquid)

  1. Buy BTC spot
  2. Short the corresponding quarterly future (if available) or a perp (but then it's funding arb rather than basis arb)
  3. Hold or roll over

Risks

  • Exchange risk: spot on one venue, future on another — either can fail
  • Basis expansion: if the basis expands further during the trade (instead of converging), a temporary mark-to-market loss
  • Funding/margin calls: futures require margin; strong moves may require topping up
  • Delivery: CME futures can be physically delivered; mind the logistics

Relevance for Botty

Hyperliquid has no dated futures (perpetuals only). The direct cash-and-carry variant is therefore not implementable. For Botty, funding-rate arbitrage is the equivalent: perp short + spot long captures the same carry phenomenon, just continuously rather than at a fixed expiry. See funding_rate_arbitrage.