Lending Thread/ Lending rates are the cost associated with...
Magus@TraderMagus
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Feb 06, 2025
~1 min read
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Lending Thread/
Lending rates are the cost associated with borrowing leverage from derivatives
Futures - A contract that represents the underlying assets, pricing is balanced through contract expiry
Perpetuals- Futures without expiry, price is balance through funding
Lending rates are the cost associated with borrowing leverage from derivatives
Futures - A contract that represents the underlying assets, pricing is balanced through contract expiry
Perpetuals- Futures without expiry, price is balance through funding
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Monitoring these rates will help to identity when markets are inexpensive or expensive
To start make a habit of watching Basis and/or APR.
Basis is the difference between spot and futures pricing, whether one is leading the other
To start make a habit of watching Basis and/or APR.
Basis is the difference between spot and futures pricing, whether one is leading the other
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Positive basis tells us derivatives are trading at a premium to spot
Negative basis tells us derivatives are trading at a discount to spot
With futures this "miss pricing" presents many opportunities, most notably Cash & Carry or reducing deltas
Negative basis tells us derivatives are trading at a discount to spot
With futures this "miss pricing" presents many opportunities, most notably Cash & Carry or reducing deltas
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For perpetuals this relationship is balanced by the funding mechanism. With positive basis, longs will pay shorts by default 0.01%(one basis point). Neg basis and shorts pay longs. Funding payments start at one basis point but can become much more expensive.
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When perps are expensive, mainly Bybit(atm), this becomes a major risk to longs. These bulls that are paying high fees to remain levered up, are the first participants to be shaken by any downside movement
How does the market resolve this? Chop them up
How does the market resolve this? Chop them up
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Ultimately lend rates should be used just as any other tool. Lending will tell us when to look for reversal points as well as when certain participants are susceptible to being squeezed
However there's nuance to it
Pos/Neg funding doesn't mean we turn around now, just to watch
However there's nuance to it
Pos/Neg funding doesn't mean we turn around now, just to watch
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Spend time watching
Imho you should get comfy with these panels. The platform is @laevitas1 before you ask
Imho you should get comfy with these panels. The platform is @laevitas1 before you ask