How Bearish Bitcoin Calendar Spread Trades Work

Short BTCUSDt September futures contracts + Long BTCUSDt perpetual swaps (OKX)

This trade will work the best if prices go down or sideways between now and settlement, here are the possible outcomes for this spread trade:

• If prices go down slightly then the spread is likely to close faster and funding rates are likely to decrease. This could result in substantial profits.
  
• If prices go down substantially, then the spread could go negative and funding rates could also be substantially negative, leading to increased profit margins.
  
• If prices go sideways then the spread will close at or before settlement time, and funding rates are likely to remain near the average for the last 90-days. This could result in modest profits.
  
• If prices increase slightly then the spread will still close at the settlement date but could temporarily increase, and funding rates may be higher than the 90-day average. This could result in either a slight gain or loss, or breakeven profits.
  
• If prices increase substantially you may lose substantially on this trade because of increased funding rates and increased time for the spread to close.
  

Example:
Short 10 BTCUSDt Sept 29th futures contracts at 29,574 + Long 10 BTCUSDt perpetual swaps at 29,330


Initial Costs & Profits:
Gross profit from the spread for 10 BTC = $244 x 10 = $2,440
Trading fees = 0.04% of $587,000 = $235 (actual fees paid when exiting will depend on market price)
Net profit after trading fees = $2,440 - $235 = $2,205

Breakeven funding rates:
If spread = 0 in 20 days
f x 293,500 × 10 × 20 = 2,205
f = 2,205/(293,500 x 20)
f = 0.0375%

If spread = 0 in 30 days
f x 293,500 × 10 × 30 = 2,205
f = 2,205/(293,500 x 30)
f = 0.0248%

If spread = 0 in 46 days
f x 293,500 × 10 × 46 = 2,205
f = 2,205/(293,500 x 46)
f = 0.0163%

(Based on these calculations, as long as the average daily funding rate is below 0.0163%, then you will breakeven or earn a profit, assuming your maker fees are 0.02% per trade)


Based on the 90-day average daily funding rate of 0.01204%, your net profit (x) would be as follows:
If spread = 0 in 20 days:
x = 2205 - 0.01204% x 293,500 x 20
x = $1,499 (+0.255%)

If spread = 0 in 30 days:
x = 2205 - 0.01204% x 293,500 x 30
x = $1,146 (+0.195%)

If spread = 0 in 46 days:
x = 2205 - 0.01204% x 293,500 x 46
x = $573 (+0.098%)

(Assuming you use 100x leverage on these trade, you would multiply your percentage profits by 100, leading to a profit of 9.8% to 25.5%. When using leverage, You must ensure that your margin does not drop below the maintenance margin requirements if the spread temporarily increases or it will result in a forced liquidation.)

Comment:

Slight correction to this formula, result unchanged (Removed unnecessary x10)

Breakeven funding rates:
If spread = 0 in 20 days
f x 293,500 × 20 = 2,205
f = 2,205/(293,500 x 20)
f = 0.0375%

If spread = 0 in 30 days
f x 293,500 × 30 = 2,205
f = 2,205/(293,500 x 30)
f = 0.0248%

If spread = 0 in 46 days
f x 293,500 × 46 = 2,205
f = 2,205/(293,500 x 46)
f = 0.0163%