macrocephalopod

Next problem is getting into a hedged position. You need to buy spot/short futures, but you need spot crypto to collateralise your futures account before you can start trading futures, so legging risk is unavoidable. I entered a tiny position first, and then bootstrapped it.

Once you have a position on it's much easier to add to it, because you can do a near simultaneous spot/futures trade and temporarily run a leveraged futures position (e.g. 50% collateralized) while you wait for your spot to transfer to your futures wallet.

I was paranoid about exchanges being hacked, so I had positions across six exchanges. The basis varies considerably across exchanges so I would have larger positions where the yield was higher. Generally Binance, FTX, Bybit, Huobi and FTX had the highest yields.

I also had some short perpetual positions vs long spot. The yield is unpredictable, but it can get really high (like 0.5%/day) and it is very low volatility because there is ~0 duration risk (compared to a hedged futures position which can have ~0.5%/day volatility)

Something that should have been clear to me in advance is that this trade is structurally short BTC. The basis goes up (=> losses) when BTC rallies and down (=> gains) when BTC sells off. The sell off from 15-22 Apr was really good for this strategy!

Some stats -- daily volatility was about 0.3%, Sharpe ratio was 4.7 and maximum drawdown was ~1.2%, which occured in the first two weeks as the basis rallied very shortly after I entered the trade.

If you're sharp-eyed you might notice that I said I made ~10% but the chart above only shows a ~7% gain. The other ~3% came from a stupid mistake.