OKEx has revealed how the arbitrage opportunities it’s giving customers on its platform are giving customers strong returns on the investment, and making trading derivatives even easier.
Recognized as one of the world’s biggest cryptocurrency exchanges, by volume, according to Coinmarketcap, Malta-based OKEx is now providing its millions of users around the globe with a ‘one-stop shop’ for them to trade spot, margin and derivatives in one place.
What’s more the platform has been demonstrated to provide a solid yield for customers over a seven-day period.
Thomas Tse, Head of Quantitative Strategy at OKEx, said this simplified the customer experience and helped customers keep all of their trades on one platform.
“With the offering of both spot, margin, and derivatives trading at one spot, OKEx provides users a world-class marketplace which opens the doors to a lot of arbitrage opportunities, saving you the hassle of withdrawing funds from a derivatives exchange to another spot trading platform, also the extra time and costs from blockchain transactions,” he said.
Writing on the OKEx blog, Mr Tse used an arbitrage opportunity between a spot margin trading interest rate and a perpetual trading fund rate, as an example.
In the example he demonstrated how over a week-long period customers could gain 1.66 per cent on their initial investment.
Basing the trade on a transaction using Tron (TRX) and Tether (USDT), Mr Tse demonstrated how customers could hypothetically generate the return.
The first step is to borrow $1,000 of TRX using $1,000 USDT as the margin. From there you sell two-thirds (or $666) of TRX for USDT.
Then using the remaining $333 of TRX as swap margin, you would buy 66 TRX contracts.
Using this example Mr Tse showed how with $1,000 USDT capital, you could expect a seven-day yield of around 1.66 per cent, or around 575 TRX.
While he outlined there were risks to this type of funding rate arbitrage, he made it clear that customers should conduct their own research before engaging in trades.
But he said that if handled properly you could increase the yield with a number of improvements to the strategy.
“Do not hold any positions. Instead, borrow TRX and open position before swap settlement. Then, close the position and repay TRX as soon as possible after receiving funding amount from settlement,” he said.
“Increase both the short order size at margin trading and the leverage level at perpetual swap trading, in order to increase the overall effective leverage.”