Basis Trade
A basis trade is a strategy that buys an asset on the spot market and sells a futures contract on it at a higher price, aiming to earn the gap between the two, the basis, while staying roughly neutral to price moves.
How the trade is built
When futures trade above spot, a market state called contango, a trader can buy the coin and short an equal amount of futures. If the price rises, the coin gains and the short loses about the same; if it falls, the opposite happens. Price moves largely cancel out, and what remains is the basis, which shrinks to zero as the future approaches expiry and converges with spot.
This is why it is also called cash-and-carry. With perpetual futures, which never expire, the equivalent is to hold spot and short the perp, earning the funding rate while it is positive. That version is often called a funding-rate arbitrage or delta-neutral strategy.
An example
Say BTC spot is 50,000 dollars and a three-month future trades at 51,000. You buy 1 BTC and short one future. At expiry both prices are equal, whatever they are. Your combined result is the 1,000 dollar gap, about 2 percent over three months, minus trading fees, any borrowing costs and the cost of keeping the futures margin.
Why it exists
The basis reflects demand for leveraged long exposure. Traders willing to take the other side get paid for it. Large funds and, in recent years, some yield-bearing crypto products run versions of this trade, which is why the strategy's returns tend to shrink when many people pursue it.
Risks that are easy to miss
Neutral is not risk-free. The short futures leg needs margin, and a sharp rally can liquidate it before expiry if it is under-collateralized, leaving you with an unhedged spot position. Holding the two legs on different platforms adds counterparty risk on both, as many traders found when FTX collapsed in 2022. With perps, funding can turn negative and the trade starts costing money. Fees and slippage can wipe out thin spreads.
Ask Coach about it
Coach is the AI on AtenaCrypto. It explains crypto with live market data, in plain words.
What are the main risks of running a delta-neutral funding-rate trade with perpetual futures?Ask Coach →
Frequently asked questions
Is a basis trade risk-free arbitrage?
No. It removes most price exposure, but it keeps liquidation, exchange, funding and execution risks, which have caused real losses.
What is the difference between a basis trade and a carry trade?
A basis trade is one kind of carry trade: it earns a recurring spread, here between spot and futures, while trying to avoid directional exposure.
What happens if the basis turns negative?
With a dated future you still converge at expiry, but mark-to-market losses appear meanwhile. With perps, negative funding means the short side pays instead of earns.
Related terms
Learn it step by step
AC Learning explains these ideas in interactive lessons — the first eight sections are free.
Open AC Learning → Create a free accountAll glossary terms · Educational reference only — not investment, legal, tax or financial advice.