How Can a Trader Use a Perpetual Contract and a Spot Position to Execute a ‘Cash and Carry’ Arbitrage?

A 'cash and carry' arbitrage is a low-risk strategy used when the perpetual contract is trading at a premium (contango) to the spot price. The trader simultaneously buys the underlying cryptocurrency on the spot market (the 'cash' leg) and sells a perpetual contract (the 'carry' leg).

The profit is locked in by collecting the positive funding rate paid by long holders until the perpetual contract price converges with the spot price. This is a market-neutral strategy that exploits pricing inefficiencies.