They would be arbed away anyway if this were not the casehttps://twitter.com/ALBACapMgmt/status/1475357374147817477 …
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Here’s a bunch of questions about basis and funding rates that I’d love to have the answers to. 1. Common sense says that futures premiums should be roughly the same as expected funding rates over the lifetime of the future, but historically they have been much lower (so that
short perp/long futures has generally been profitable — why?) 2. Funding rates and premiums can be persistently quite different across different exchanges. What are the main drivers of this? 3. How does options hedger demand affect funding rates and futures premiums? (eg
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funding rates for ETH at deribit spiked recently compared to other exchanges — is that because of option hedger activity?)
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4. What ultimately constrains funding rates/premiums on the downside? Is it purely demand coming back, or do some players attempt the reverse funding arb?
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Imo 2. can be partially attributed to country restrictions and laziness. eg. US VC would hedge some of their allocation on a US exchange with a twap and depress price/funding. Korean kimichi prem another example that is difficult to realize even for residents.
Thanks. Twitter will use this to make your timeline better. UndoUndo
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Perp has always higher funding in an up market because Perps are generally more liquid thus more suitable for short term trading. Most exchanges list futures only 3-6m out. Deribit futs are therefore mostly driven by arbs and options activity as
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Nobody trades the illiquid 9m or weeklies where bid/offer is ridiculous. Option MM hedge size delta with perps first and then distribute further out by adding liquidity.
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