Traders can purchase ADA perpetual contracts and simultaneously sell ADA tokens in the spot market to safely pocket the funding rate, one expert said. Reporting by godbole17
While you continue to fret over the broader market lull, remember there are always opportunities out there and they often present themselves in different ways.
In a note sent to clients early Friday, Thielen said ADA's annualized funding rate, or the cost of keeping long /short positions open, has dropped to an average of -14% across major exchanges – a rare occurrence in the past eight months. As a result, traders can purchase ADA perpetual contracts and simultaneously sell ADA tokens in the spot market to safely pocket the funding rate.
The long trade, however, is unhedged. If ADA's price tanks, the resulting loss could be more significant than the 14% yield generated from the funding rate. The entity can eliminate the risk by selling ADA tokens in the spot market, thereby creating a market-neutral position. "You can currently make 14% profit by purchasing perpetual future, borrowing the ADA tokens from a firm like Matrixport, and selling those. If and when the spot price and perpetual futures converge, you should make a 14% profit return," Thielen told CoinDesk.
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