Real-time Arbitrage Signals Help You Complete Various Arbitrage Operations

LAT-3. 43%

Currently, arbitrage trading remains a highly mainstream strategy in European and American markets, and has gradually become an investment method gaining attention from investors in China. Due to the numerous arbitrage opportunities in the cryptocurrency market, it has become a hotbed where arbitrage is more concentrated. The increasingly thriving arbitrage market has also given rise to numerous arbitrage strategies, and the implementation of these strategies often relies on precise arbitrage tools or arbitrage signals. This article will use OKX's latest arbitrage signals as an example to introduce the use of arbitrage data.

1. What Is Arbitrage

Arbitrage, at its core, refers to following the principle of "market neutrality" in investment trading markets and obtaining risk-free returns through various methods. It is regarded as a stable value-growing investment method. Since the earnings primarily come from price differences, interest, and other gains that do not affect the principal, it is also commonly referred to as no-principal arbitrage. Due to extremely low investment risk, when capital is substantial, the returns can be very considerable, making arbitrage a highly favored investment method among investors.

The cryptocurrency market exhibits unique phenomena such as multi-platform price differences, spot-contract price differences, and perpetual contract funding fees. Therefore, compared to traditional financial markets, it offers more arbitrage opportunities and greater potential arbitrage returns.

2. Main Arbitrage Methods

Specifically, the cryptocurrency market mainly features the following arbitrage methods. You can also click the corresponding tutorial to learn more about the principles, operations, and simulated returns.

1) Earn Coins Arbitrage Strategy

Through the earning features of trading platforms, idle crypto assets are deposited into corresponding accounts or locked for mining to generate interest returns. Earn coins arbitrage is a risk-free strategy with relatively stable returns, averaging approximately 8% annual yield, with some cryptocurrencies yielding annual returns as high as 80%. For details, see the tutorial:Deposit Coins to Earn Interest — The Earn Feature Helps You Achieve Considerable Annual Returns

2) Brick Moving Arbitrage Strategy

This strategy primarily exploits price differences of cryptocurrencies across trading platforms. The main operation involves buying a large quantity on the platform with the lower price when a significant price difference is spotted, then depositing and selling on the platform with the higher price to profit from the spread. This method carries considerable risk due to the rapid real-time changes in cryptocurrency prices. It is possible that after moving bricks, there is no price difference left, resulting in a loss of deposit fees. It is also possible that the price after moving bricks falls below the purchase price, causing a loss.

3) Funding Fee Arbitrage Strategy

Funding fees are an effective mechanism for anchoring perpetual contract prices to spot prices. Users holding positions at the time of funding fee settlement are required to pay or receive funding fees. When the funding fee is positive, longs pay funding fees to shorts; conversely, shorts pay funding fees to longs. When position value is high, funding fee returns can be quite considerable. Using OKX's unified account, funding fee arbitrage operations can be carried out more conveniently. For details, see the tutorial:Funding Fee Arbitrage Strategy — Simple Three Steps to Enjoy 500% Annualized Returns

3) Calendar Spread Arbitrage Strategy

Calendar spread arbitrage involves establishing equally-sized, oppositely-directed trading positions on different-month contracts of the same futures instrument, ultimately closing the trades through hedging or delivery methods to earn returns. In the crypto market, if the price difference between two contracts deviates from the reasonable spread, investors can buy one contract while selling the other contract. When the spread returns to normal, they perform corresponding reverse position closing to profit from the reasonable spread regression. Since positions share margin, there is no liquidation risk. For details, see the tutorial:Calendar Spread Arbitrage Strategy — How to Arbitrage 300 U Contract Spread?

4) Spot-Futures Arbitrage Strategy

Spot-futures arbitrage is the practice of arbitraging unreasonable price differences between the futures market and spot market for the same underlying asset. Arbitrageurs can construct spot and futures arbitrage asset portfolios, expecting the spread to return to a reasonable value range to capture arbitrage profits. It is important to note in the crypto market that contracts carry liquidation risk. For details, see the tutorial:Spot-Futures Arbitrage Strategy — Portfolio for Considerable Arbitrage Returns

5) Grid Arbitrage Strategy

The basic operational method involves using a certain price point as a base. For every increase or decrease of a set number of ticks, a certain quantity of sell orders or buy orders is placed, with a profit target set but no stop-loss. When the price moves in the expected direction, positions are closed for profit, and equivalent buy or sell orders are placed at the original price point. The trading orders placed in this manner form a grid-like array resembling a fishing net, generating profits repeatedly in ranging markets. For details, see the tutorial:How to Conduct Ultra-Low-Risk Arbitrage in Ranging Markets? – Grid Arbitrage Strategy

In addition to those introduced above, strategies such as halving arbitrage and airdrop arbitrage also exist in the market. However, since these are mostly opportunistic strategies not suitable for daily investment, detailed introductions are omitted here.

3. Features and Advantages of the Arbitrage Signal Function

OKX has launched the arbitrage signal function. What specific features and advantages does it have? Let's take a closer look.

1) Features

① Funding fee arbitrage and spread arbitrage — two arbitrage modes

② USDT-margined and coin-margined contracts — two contract methods

③ Reference arbitrage combinations, 3-day per 10,000 returns, reference annual yield, cumulative funding fee over the past 3 days, current | predicted funding fee, position value, time until settlement, and various other indicators

④ Spread rate indicator provided for funding fee arbitrage; estimated maximum duration indicator provided for spread arbitrage

2) Advantages

① Real-time data. As a trading tool self-developed by the platform, it can more promptly reflect relevant data on the platform. Investors can obtain real-time data through the tool. For arbitrage users, especially brick-moving arbitrage users, time is an extremely critical and important factor. This arbitrage signal function fully meets the needs of arbitrageurs and maximizes time opportunities.

② Accurate data. Similarly, as a trading tool for platform assets, the data is more accurate. Arbitrageurs can clearly understand the data status of various indicators, avoiding risks caused by information gaps and data errors.

③ Convenient operation. During the arbitrage process, the arbitrage signal function can be used intuitively, and strategies can be adjusted in real-time based on changes in arbitrage signal data. All operations can be completed on the same platform, greatly enhancing convenience.

④ Diverse indicators. The arbitrage signal includes data on two arbitrage modes and various contract types, along with rich and diverse indicators, meeting the different arbitrage needs of various users. Users can comprehensively consider and judge by combining various indicators and data.

4. How to Use the Arbitrage Signal Function

OKX has added an arbitrage signal function containing various data. You can select one of the two arbitrage modes — funding fee arbitrage or spread arbitrage — then select the contract type. After that, you can observe data such as funding fees and spread rates for various cryptocurrencies, and combine them with reference annual yield values to seize opportunities for arbitrage operations.

This article uses funding fee arbitrage as an example to demonstrate how to use the arbitrage signal function and its functional significance.

1) Use Arbitrage Signals to Select Cryptocurrencies

① Open the OKX official website, click Markets in the navigation bar, then enter the **Arbitrage Data** page.

② Based on actual needs, select the margin mode and arbitrage mode. You can view recommended arbitrage combinations, funding fees, reference annual yields, and other data for various cryptocurrencies. Click the sorting buttons next to each data item to sort cryptocurrency arbitrage data from low to high or from high to low. After comprehensively reviewing the indicator data, you can determine the arbitrage cryptocurrency and arbitrage combination.

Since spread arbitrage has a longer profit cycle, this article uses funding fee arbitrage as an example, selecting the LAT cryptocurrency with a higher current funding fee absolute value and higher annual returns.

2) Conduct Arbitrage Operations

After determining LAT as the arbitrage cryptocurrency, you can conduct arbitrage operations under the spot and contracts mode or cross-margin mode of OKX's unified account. Following the reference arbitrage combination provided by the arbitrage data, leverage-perpetual contract combined arbitrage is performed here (if the arbitrage cryptocurrency has delivery contracts, delivery-perpetual contract combined arbitrage can be performed, avoiding interest deductions and further improving the returns rate). The specific operational steps are as follows:

① On the LAT/USDT perpetual contract, buy long 2,000 LAT with 5x leverage, principal of 137.7 U, position value of 682 U

② On the LAT/USDT spot margin, sell short 2,000 LAT with USDT as margin at 5x leverage, principal of 137.7 U, position value of 682 U

③ Regardless of whether the market rises or falls, the returns from positions in both directions offset each other, with no risk of principal loss

④ Returns = principal × leverage multiplier × (funding fee rate − leverage interest rate), returns rate = returns / 2 × principal = leverage multiplier × (funding fee rate − leverage interest rate) / 2 = leverage multiplier × reference annual returns rate.

⑤ The cumulative funding fee over 3 days is approximately 0.522%, daily funding fee is approximately 0.522% / 3 = 0.174%; daily leverage interest rate is approximately 0.05%.

If using the delivery-perpetual combined arbitrage method, there is no interest cost, simulated annual returns rate = 365 × 5 × 0.174% / 2 = 5 × 31.78% = 158.9%;

If using the leverage-perpetual combined arbitrage method, interest costs need to be considered, simulated annual returns rate = 365 × 5 × (0.174 − 0.05%) / 2 = 113.15%;

⑥ The actual annualized returns rate in operations is closely related to the leverage multiplier. The higher the leverage multiplier, the higher the annualized returns rate. It can be roughly calculated as leverage multiplier × reference annual returns rate.

Note: 1. If using the delivery-perpetual combined arbitrage method, contract spread issues need to be considered. 2. If using the leverage-perpetual combined arbitrage method, due to leverage gradient restrictions, the leverage multiplier should be reasonably controlled in actual operations to ensure executability.

Specific operations and returns

3) Adjust During Arbitrage by Combining with Arbitrage Data

In actual arbitrage operations, you can monitor the data from the arbitrage signal function and adjust strategies and operations based on market changes. For example, when changes in multiple indicators occur, such as the predicted funding fee for the arbitrage cryptocurrency turning from negative to positive and position value decreasing, it may be time to consider closing positions and ending the arbitrage. Conversely, when the funding fee increases and position value increases along with other multi-indicator changes, you may consider increasing the arbitrage capital. Data and indicator changes can provide guidance on strategy and operations. We should make rational use of arbitrage signal tools and other tools to execute trading ideas in investment trading.

**Summary: ** As outlined above, arbitrage, as a low-risk, stable returns investment method, requires operations based on indicators combined with timing. By utilizing the trading tools provided by trading platforms, trading users can receive more real-time, accurate, and convenient data, helping users better execute their trading strategies, fulfill their operational ideas, and achieve their investment trading goals. The OKX arbitrage signal function has already been launched. We look forward to your use and feedback. In the future, OKX will stay true to its original aspiration and continue providing users with superior products and quality services!

Disclaimer

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