What is Arbitrage?
Arbitrage refers to exploiting price differences between markets using hedging or swapping techniques to earn low-risk profits. Common arbitrage methods include funding rate arbitrage, futures-spot arbitrage, and futures-futures arbitrage.
The crypto market offers more arbitrage opportunities than traditional finance due to unique phenomena like spot-futures price gaps and perpetual contract funding rates, often yielding higher profit margins.
How to Place Arbitrage Orders?
1) Create an Arbitrage Order Strategy
Example (BTC/USDT):
In the OKX App, navigate to 【Trade】→ 【Strategy Trading】, select 【Create Strategy】→ 【Arbitrage Order】. On the strategy setup page, choose a pairing under 【Funding Rate Arbitrage】 or 【Price Gap Arbitrage】, configure parameters, and click 【Two-Leg Order】.
Explanation of 5 Order Types:
- Limit/Market/Counter Price: Functions identically to manual trading.
- Overprice: Maximum allowed deviation from the top bid/ask when taking liquidity.
- Queue Price: Maximum allowed deviation for resting orders outside the top bid/ask.
2) Terminate the Arbitrage Strategy
Close positions when:
- Funding rate profits meet expectations (funding rate arbitrage).
- Price gaps converge (futures-spot or futures-futures arbitrage).
To stop: Go to 【Strategy Trading】→ 【Active】→ Select the arbitrage strategy.
Key Reminders:
- Profit Timing: Funding fees settle daily; futures-spot profits require manual closing upon price convergence.
- Risk Warnings: Potential risks include funding rate volatility, USDT price fluctuations, and liquidation risks. Assess your risk tolerance thoroughly before trading.
- Automatic Termination: Strategies halt if the asset faces delisting or halts.
FAQ
Q1: Is crypto arbitrage risk-free?
A1: While low-risk, it’s not risk-free. Factors like sudden price swings or exchange issues can impact outcomes.
Q2: How often does funding rate arbitrage settle?
A2: Typically every 8 hours, varying by platform.
Q3: Can I automate arbitrage strategies?
A3: Yes, via APIs or bots, but ensure compliance with exchange rules.
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