Aevo Basis Trade
Aevo Basis Trade will be collecting funding payments by simultaneously buying spot and selling a perpetual future contract for the same asset against it.
The vault does not take any directional exposure (delta-neutral), as every long spot position is balanced by a short perpetual future position.
The vault is expected to perform positively as long as the funding rate is positive.
The Strategy execution is fully algorithmic and continuously monitored by our risk team.
Trade Rationale
Spot and future contracts prices diverge based on demand and supply dynamics, this differential is known as the “basis”.
To ensure their convergence, periodic payments are made between traders who hold positions in perpetual futures contracts. These payments are referred to as funding payments.
Based on the differential between index price (spot) and mark price (perpetual future price), the funding rate will be either negative or positive:
Positive funding rate: Long position holders pay short position holders
Negative funding rate: Short position holders pay long position holders
Backtest and initial run
Aevo Basis Trade has been running since June 01 and has been backtested for 1 year, producing the following results:
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