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macrocephalopod‏ @macrocephalopod 1 Jul 2021

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!

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macrocephalopod‏ @macrocephalopod 1 Jul 2021

So how did I do? I had targeted a 25%/year return and I made about 10% in three months, so I more than hit the target, though I ended up exiting the positions much earlier than I liked. Cumulative return below (based on snapping my account equity at 5pm each day)pic.twitter.com/t5KmsNfwzc

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macrocephalopod‏ @macrocephalopod 1 Jul 2021

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.

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macrocephalopod‏ @macrocephalopod 1 Jul 2021

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.

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macrocephalopod‏ @macrocephalopod 1 Jul 2021

macrocephalopod Retweeted macrocephalopod

Around the first week of May I decided to "reach for yield". Doge was rallying and I noticed that I could sell DOGE/USD perpetuals and earn ~3x the yield that I could on a BTC/USD perpetual, so I allocated a small portion of the portfolio to thathttps://twitter.com/macrocephalopod/status/1391137796979560450?s=20 …

macrocephalopod added,

macrocephalopod @macrocephalopod

Replying to @Ivan_Vesely_ @goodalexander @choffstein

Noted virgin @choffstein was selling BTC perps for a tiny 30% yield, real chads are crushing Doge for 60-90% average yields.

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macrocephalopod‏ @macrocephalopod 1 Jul 2021

A bit more than a week later was May 19, a huge crypto sell off. My DOGE/USD future was auto-deleveraged to close out a levered long, leaving me naked long DOGE in a falling market. Not good!

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macrocephalopod‏ @macrocephalopod 1 Jul 2021

I was in a meeting when I was notified and it was half an hour before I could trade out of the spot position. I was incredibly lucky - my futures buy nearly bottom ticked the market at ~0.2 and I closed out the spot at ~0.31 for a +50% profit (about +3% of my total equity)pic.twitter.com/GYF1b4gkez

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macrocephalopod‏ @macrocephalopod 1 Jul 2021

I removed that the pnl from that trade from the chart above - here's what it looks like if I leave it in. Taking a ~6% basis position in a memecoin where I knew there was high risk of auto-deleveraging was a bit stupid, and I was lucky it worked outpic.twitter.com/XbzXkQ9dkV

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macrocephalopod‏ @macrocephalopod 1 Jul 2021

I made a bunch of other dumb mistakes too, like sizing the spot/futures legs incorrectly to begin with, occasionally trading the wrong contract and needing to trade out, and messing up a currency conversion once. Fortunately none of them cost me more than a few bps.

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macrocephalopod‏ @macrocephalopod 1 Jul 2021

By far the most time consuming thing was doing my pnl each day, so I'd definitely look for a way to automate that in the future. I also bought a subscription to Skew Analytics which was helpful, though probably not strictly necessary.

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