For those of us who participate in the crypto community, trading is something that we are used to. This being one of the favorite investment mechanisms for cryptocurrency users. In this sense, future contracts on assets such as Bitcoin, would be one more tool to generate profits by investing in the crypto market. Therefore, today we explain how to make money in Binance with the spread trading of future contracts.
What is spread trading?
First of all, we must begin by explaining what the Bitcoin futures contract trading spread, and how to use it to make a profit on Binance Futures. Well, it would be an investment strategy that takes advantage of the particular characteristics of future contracts. In this way, obtain profits with the different expiration dates of the same.
Thus, as future contracts are commitments for the purchase or sale of a certain amount of Bitcoins on a certain date. This makes it possible to buy or sell futures with different dates and prices. Therefore, it is possible to buy a future contract with expiration in August, at the same time that one with expiration in November is acquired.
This generates a price differential between the two contracts, as each of them will have a different value. The future contract expiring in August for $ 9,400 may be quoted at any given time. While the November contract can be located at $ 9,500. Which translates into a loss of $ 100 for the investor.
But if, on the contrary, the price of the August contract increases to $ 9,600 while that of November remains at 9,500, now the investor would see a profit of $ 100. So the key to obtaining profits from spread trading within Binance is the simultaneous purchase and sale of two contracts whose price differential is favorable to us.
Why use this strategy in Binance?
Now, if spread trading seems to be a relatively simple strategy, we still have to understand why use it to generate profits with our investments? After all, is buying and selling Bitcoin and futures contracts not enough? And in this respect, spread trading with Binance Futures has several advantages.
And it is that, thanks to this strategy, it will not matter the direction in which the market goes, but the one that the spread between your contracts follows, becoming to some extent independent of the development of Bitcoin. Well, even in times of great volatility, normally the price of contracts varies in unison. Furthermore, the leverage in the purchase of future contracts, together with low transaction costs, means that this strategy is available to any retail trader.
Of course, this does not mean that there are no risks when using spread trading on platforms like Binance. Well, the very fact that futures are highly leveraged products, makes potential losses in the spread trading operation multiply. This without taking into account other factors specific to the futures market such as a possible lack of liquidity in the market.
However, at the end of the day these risks are not much higher than those faced by traders in their operations every day. So when viewed in perspective, trading spread on Binance Futures seems to be one of the best strategies to consider to make money by investing in cryptocurrencies.