Delta Exchange, a cryptocurrency derivatives trading platform that’s not regulated in any jurisdiction, revealed on August 27, 2020, that it will be offering calendar spread contracts on Bitcoin (BTC) futures.
Calendar spread trading for Bitcoin or BTC futures is scheduled to begin on Delta Exchange “on August 27, 2020, at 9:00 AM ET.” Delta Exchange noted in a release shared with CI that it is also planning to add calendar spread contracts on Ethereum (ETH) and various altcoin (alternative coin) futures.
As explained in the release:
“Bitcoin spread contracts will margin and settle in Tether (USDT). Traders can deposit USDT to their accounts or convert BTC to USDT on Delta Exchange to trade these contracts. USDT quoting will allow traders to easily lock in the desired dollar spread, via limit orders, without worrying about the price of Bitcoin.”
As noted in the announcement, calendar spread contracts have been designed to allow for simultaneous trading in two different futures contracts, on “the same underlying asset, with different delivery dates for short and long positions.”
The introduction of Delta Exchange’s spread contracts will enable crypto traders to trade the price difference between two BTC futures contracts with different maturity dates. As explained in the release, a position in the spread contract is “representative of offsetting long and short positions” in Bitcoin and won’t need independent margining.
Pankaj Balani, CEO at Delta Exchange, noted:
“Currently, if a trader spots a mispricing between longer maturity and shorter maturity futures and wants to take a position on the calendar spread, they would have to take a position in both these futures separately and margin for them separately. Since both the futures are on the same underlying asset, they are highly correlated, which means that the losses in one position are offset by gains in another. This reduces the margin requirement and that benefit is passed on to the customers.”
Spread contracts can make it easier for investors to conduct trades, because they don’t require them to manage two different positions. With these types of contracts, traders only need to manage a single linked position, which requires less margin. This brings greater capital efficiency and it’s also cost-effective as the trading fee for the spread contracts is significantly lower than that of “trading both legs separately,” the release stated.
“Spread contracts present low-risk opportunities because they involve having a long and a short position on the same asset.”
Algorand (ALGO), VeChain (VET), Kava, and Synthetix (SNX) perpetual contracts were recently launched on Delta Exchange. Delta also introduced new contracts on its ETH-MOVE and BTC-MOVE products. In July 2020, the exchange began offering interest rate swaps for MakerDAO’s stablecoin Dai.
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