What Is a ‘Futures Contract’ and How Can It Be Used in Stablecoin Arbitrage?
A futures contract is an agreement to buy or sell an asset at a predetermined price on a specified future date. In stablecoin arbitrage, a futures contract on the collateral asset (e.g.
BTC) can be used to lock in the price of the collateral received from the burn, reducing price risk between the arbitrage steps. This allows for a more certain profit calculation.
Glossar
Collateral Asset
Framework ⎊ Within cryptocurrency, options trading, and financial derivatives, a collateral asset serves as a foundational element ensuring counterparty risk mitigation and facilitating margin requirements.
Futures Contract
Leverage ⎊ Futures contracts in cryptocurrency represent agreements to buy or sell an underlying asset at a predetermined price on a future date, functioning as a derivative instrument that allows for amplified exposure without immediate asset ownership.
Price Risk
Exposure ⎊ Price risk within cryptocurrency derivatives manifests as the potential for loss stemming from adverse movements in underlying asset valuations, impacting positions held in futures, options, and perpetual swaps.