cash-and-carry on the bitcoin consumes to much margin

[adieucourtier]

Hi there,

As a non-US customer, i cannot purchase bitcoin via Paxos, so i have to purchase UCITS spot bitcoin ETF instead.

Here is the trade :
leg 1 - LONG spot bitcoin ETFs worth $6500
leg 2 - SHORT 1x micro bitcoin future contract worth $6500

maintenance margin increase + $9750 !

I asked the IBKR support why so much margin is required for a delta neutral trade : "we cannot offset the risk for the bitcoin underlying" they said.

Could you find another way to place the trade, if possible with leverage ? As a european resident, i do not have access to crypto exchanges trading futures such as Binance for instance. I think the +1.2% per month is a nice trade to be taken though...

Thanks !

 

[murray t turtle]

Hi there,

As a non-US customer, i cannot purchase bitcoin via Paxos, so i have to purchase UCITS spot bitcoin ETF instead.

Here is the trade :
leg 1 - LONG spot bitcoin ETFs worth $6500
leg 2 - SHORT 1x micro bitcoin future contract worth $6500

maintenance margin increase + $9750 !

I asked the IBKR support why so much margin is required for a delta neutral trade : "we cannot offset the risk for the bitcoin underlying" they said.

Thanks !

%%
NO ,but i know how to take a hint ''we can't off set the risk ''.
I dont park as close to rail road crossing, as when i was younger \
past 10 years/I saw a rail car fly off the tracks, much further than I figured. To much risk for too little reward.
You're welcome

 

[newwurldmn]

Hi there,

As a non-US customer, i cannot purchase bitcoin via Paxos, so i have to purchase UCITS spot bitcoin ETF instead.

Here is the trade :
leg 1 - LONG spot bitcoin ETFs worth $6500
leg 2 - SHORT 1x micro bitcoin future contract worth $6500

maintenance margin increase + $9750 !

I asked the IBKR support why so much margin is required for a delta neutral trade : "we cannot offset the risk for the bitcoin underlying" they said.

Could you find another way to place the trade, if possible with leverage ? As a european resident, i do not have access to crypto exchanges trading futures such as Binance for instance. I think the +1.2% per month is a nice trade to be taken though...

Thanks !

I bet this is one of the reasons the cash and carry opportunity is so wide. The margin required is insane.

 

[ajacobson]

The c n c market in locals you can accomplish it in is both a margin-reducing play and a rate of return play. The OP is in an environment where he says he has to simulate c n c and that places him at a fair disadvantage. Much like a European option box, the marketplace provides a mechanism to bang it back into line. You can do it in the US where you have a marketplace that trades the cash and the future in one spot. Ironically, you can also do it in the Gulf, but I suspect they're farming it out so it's a tad worse.
Regulatory arbitrage at its worst.
You'll be able to do it at the CBOE shortly if they ever get success in their planned physically settled future.

 

[newwurldmn]

or if spot ETF have listed options on them

The c n c market in locals you can accomplish it in is both a margin-reducing play and a rate of return play. The OP is in an environment where he says he has to simulate c n c and that places him at a fair disadvantage. Much like a European option box, the marketplace provides a mechanism to bang it back into line. You can do it in the US where you have a marketplace that trades the cash and the future in one spot. Ironically, you can also do it in the Gulf, but I suspect they're farming it out so it's a tad worse.
Regulatory arbitrage at its worst.
You'll be able to do it at the CBOE shortly if they ever get success in their planned physically settled future.

 

[ajacobson]

Probably the best way for retail as you won't get cross-margining in most markets.

 

[adieucourtier]

or if spot ETF have listed options on them

i guess the long leg could be replaced by deep-in-the-money CALL options on $GBTC or $IBIT. Dont know when the release date for those products is scheduled though...

You'll be able to do it at the CBOE shortly if they ever get success in their planned physically settled future.

A physically settled crypto future would be a nice instrument to allow the broker to "net" the long and short position margins...