1.What is Arbitrage?
Arbitrage is the practice of exploiting price differences for the same asset across different markets to generate profit. It is often considered a low-risk investment strategy, commonly realized through hedging or swapping. In the cryptocurrency market, popular forms of arbitrage include: Funding Rate Arbitrage, Futures-Spot Arbitrage, Spot - Spot Spread Arbitrage, and Futures - Futures Spread Arbitrage. Funding Rate Arbitrage: Buy assets in the spot market while simultaneously shorting the same amount of assets in the futures for hedging, thus earning funding rate returns from perpetual futures trading. Futures-Spot Spread Arbitrage: When futures prices are higher than spot prices, investors can buy cryptocurrency in the spot market and short the same number of contracts in the delivery futures market. When the price difference between the two markets shrinks or disappears, investors can close their positions and make profits. Spot - Spot Spread Arbitrage: Taking advantage of price discrepancies across different exchanges by buying low on one and selling high on another. Futures - futures Spread Arbitrage: Profiting from the spread between contracts of the same asset with varying expiration dates.
2.What Are the Advantages of Gate's Inter-Exchange Spread Arbitrage Bot?
Gate offers an inter-exchange spread arbitrage bot that facilitates arbitrage trading across different platforms. Compared to products limited to arbitrage within a single platform, this bot captures better arbitrage opportunities and provides optimal arbitrage portfolios. 1.Inter-Exchange Arbitrage: Create flexible arbitrage portfolios across Gate, Binance, and OKX, capturing better opportunities. 2.Optimal Arbitrage Portfolios: Leverage assets from multiple platforms to identify the most profitable arbitrage scenarios. 3.Real-Time Monitoring: Keep track of your positions and arbitrage balance status in real-time, allowing for effective risk management.
3.How Does the Bot Work?
The inter-exchange spread arbitrage, where one leg is the spot market and the other is the futures market. This bot can take advantage of the spread between the spot and futures markets before expiration. According to market trends, futures prices typically converge towards spot prices before expiration. By leveraging this principle, traders can buy the spot asset at a lower price and sell the futures contract at a higher price when there is a significant spread. When the spread narrows, they can close their positions to realize the profit from this spread. For example: Consider BTC: the last price for spot BTCUSDT is 62,000 USDT, while the last price for the BTCUSDT quarterly futures contract expiring on September 27 is 65,000 USDT. The spread between the spot and futures is 65,000 - 62,000 = 3,000 USDT. If a trader buys 1 BTC in the spot market and sells 1 BTC in the futures market, the trader would spend 62,000 USDT on the spot purchase and use 65,000 USDT as margin for the futures contract (assuming leverage of 1x and excluding trading fees). At expiration, if the spread approaches 0 and both legs have a new price of 68,000 USDT, the spot position would yield a profit of 68,000 - 62,000 = 6,000 USDT, while the futures position would incur a loss of 68,000 - 65,000 = 3,000 USDT. Thus, the overall profit from both legs would be 6,000 - 3,000 = 3,000 USDT. Conversely, if the last prices for both legs drop to 58,000 USDT, the spot position would incur a loss of 62,000 - 58,000 = 4,000 USDT, while the futures position would gain 65,000 - 58,000 = 7,000 USDT, resulting in a combined profit of 7,000 - 4,000 = 3,000 USDT.
4.How to Use the Bot?
Step 1: Open the Spot trading page on the web, click on the upper right "Bots" button, and choose "Inter-Exchange Arbitrage" in the bot list to start trading.
Step 2: Select a favorite arbitrage portfolio.
The page is divided into five zones, arranged from top to bottom and left to right: top information zone, arbitrage portfolio selection zone, candlestick chart zone, order placing zone, and order zone. In the arbitrage portfolio selection zone, you can choose an appropriate arbitrage portfolio. The key indicators for measuring the profitability of an arbitrage portfolio are the spread rate and the APR. A higher spread rate indicates a greater potential profit. However, some arbitrage portfolios may have a high spread rate but require a longer holding period, so it is recommended to consider the APR as well.
Step 3: Enter the investment amount. In the order zone, the maximum investment amount will be calculated based on the quantity of the same cryptocurrency needed for both legs of the order. Please note that the amount you entered cannot be higher than the maximum investment amount. While entering the amount, you can check the available balance for the corresponding account. If you place an order in the futures market, the available balance will reflect the amount in the futures account. For futures-spot arbitrage in the USDT futures market, the investment will be in USDT. If you haven't added a trading account of the other exchange for the arbitrage portfolio, you cannot create the bot. Please follow the prompts to add the necessary trading account. After clicking "Create," the bot will simultaneously place orders in both exchanges. It may take some time to balance the position sizes of both legs. Due to factors like price fluctuations, trading fees, etc., the actual filled amount may differ slightly from your initial investment.
Step 4. Monitor and Manage the Bot
1.Monitor Your Bot
In the order zone, you can click on "Bots" to view the details of the active arbitrage bots, including position info, returns, balance status, and trade history.
Position Info: The bot will synchronize real-time trading data from both accounts. If you change the position size, this information will be updated accordingly.
Display Initial Position: This feature allows you to quickly check the initial position size and current profit status. After selecting, it will display the initial position size, which will not be updated as your position size changes.
Trade History: The bot's arbitrage trading history will be displayed in this section.
2.Manage Your Bot
Before the contract delivery in the arbitrage portfolio, you can terminate your bot anytime. When terminating, you can choose to close positions or leave them open. If you decide to close positions, the bot will close all positions in both accounts. If you opt not to close positions, you can manage them manually.
When the position sizes in your two accounts are unbalanced, you can select the "Balance" button, and then the bot will close positions in the account with a larger position size.
Step 5: Terminate the Bot
There are four ways to terminate the bot:
1.Manually terminate the bot.
2.The contract in the arbitrage portfolio reaches its delivery time, at which point the bot will be terminated automatically.
3.During the operation, the bot will monitor the spread rate. When the spread rate approaches 0, the bot will be terminated and positions will be closed to realize profits.
Note: If the positions in the arbitrage portfolio decrease due to your trading actions (such as buying/selling, transferring, withdrawing) or due to exchange actions (such as auto-deleveraging), your positions will need to be handled manually by you and not by the bot.
Gate reserves the final right to interpret the product. For further assistance, please visit the Gate official support page or contact our customer support team.
