Buy Spot, Short Perps, Collect Funding?

[romaleo]

Let's say I buy 1 BTC at 60k. Then I short 60k perpetual futures contracts on an exchange (and collect funding assuming positive funding longs pay shorts). Is this a good relatively risk free way to make a decent return, or am I missing something? Thanks.

[Charles-Tim]

As you know, trading future contracts comes with great risks, the higher the leverage the high the gain it if favours or the higher the loss if otherwise. If bitcoin is at $60000 and you short/sell, if the price decrease like you meant, you will gained, no loss. Also, if you long/buy it and the price of bitcoin increase, that means you also gain. But, if otherwise, it means the trade is a loss in which the money used will be liquidated at a certain price depending on the leverage used, it means if you go short and the price increase, it means loss, or if gone long and the price decrease, the result is also loss.

[romaleo]

Thanks for the reply but you didn't answer my question at all, you simply described what leverage trading is. I know what leverage trading is. I'm asking about a specific scenario or form of arbitrage, where by one would earn a return while only subject to counter party risk of default.

Another method would be buying spot, and selling a future contract for a future date listed at a higher price. I asked about my example though because I believe the returns via funding would exceed the spot-future contract difference.

Thoughts?

[btcsmlcmnr]

You will have to read and understand cross and isolated margin for your future tradings. They are all risky trading types but if you all your capital and high leverage, two types will liquidate all your capital if your position is bad.

If you control your position and have good fund allocation (isolated or cross account), your position and your capital can be protected better. In liquidation on your position, you won't lose all capital.

Binance Futures Trading Platform Launches Isolated Margin Mode, Offering More Precise Position Control to Traders

With 1 BTC as your start capital, I recommend you to choose a safer way, invest and trade with Sport.