Cash-and-Carry Arbitrage

Cash-and-carry arbitrage is a strategy used to profit from the price discrepancy between the spot market and the futures market. A trader executes this by purchasing the underlying asset in the spot market while simultaneously selling an equivalent amount of the asset in the futures market.

By holding both positions until the contract expiration, the trader locks in the price difference, or basis, as a guaranteed profit. This strategy is considered low-risk because the trader is effectively hedged against price movements in the underlying asset.

The profit is essentially the basis minus any transaction costs, borrowing costs, or storage fees. In crypto, this strategy is popular among institutional players who seek to earn yield by exploiting inefficiencies in the futures basis.

It requires careful management of margin requirements and liquidity to ensure the positions remain open until expiration.