# Basis Trade Strategies ⎊ Area ⎊ Resource 2

---

## What is the Basis of Basis Trade Strategies?

Basis trade strategies exploit the price differential, or basis, between a cryptocurrency's spot price and its corresponding derivative contract, typically a futures contract. This differential represents the cost of carry, encompassing factors like funding rates and time to expiration. The strategy relies on the expectation that the basis will converge to zero as the derivative approaches its settlement date.

## What is the Arbitrage of Basis Trade Strategies?

A common implementation involves simultaneously buying the underlying asset in the spot market and selling a futures contract on the same asset. This creates a market-neutral position where profit is locked in by capturing the premium of the futures contract over the spot price. The strategy's success depends on the accurate calculation of the basis and the ability to execute both legs of the trade simultaneously.

## What is the Execution of Basis Trade Strategies?

While often considered low-risk arbitrage, basis trading in crypto markets carries specific risks, including funding rate volatility and potential counterparty risk on centralized exchanges. Liquidity constraints in either the spot or derivatives market can hinder trade execution and impact profitability. The primary risk factor is the possibility of adverse changes in the funding rate, which can erode profits or even lead to losses if not properly managed.


---

## [Latency-Risk Trade-off](https://term.greeks.live/term/latency-risk-trade-off/)

## [Security Trade-off](https://term.greeks.live/term/security-trade-off/)

## [Proof Size Trade-off](https://term.greeks.live/term/proof-size-trade-off/)

## [Pre-Trade Cost Simulation](https://term.greeks.live/term/pre-trade-cost-simulation/)

## [Latency-Finality Trade-off](https://term.greeks.live/term/latency-finality-trade-off/)

## [Cross-Chain Trade Verification](https://term.greeks.live/term/cross-chain-trade-verification/)

## [Security Model Trade-Offs](https://term.greeks.live/term/security-model-trade-offs/)

## [Security-Freshness Trade-off](https://term.greeks.live/term/security-freshness-trade-off/)

## [Liveness Security Trade-off](https://term.greeks.live/term/liveness-security-trade-off/)

---

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---

**Original URL:** https://term.greeks.live/area/basis-trade-strategies/resource/2/