DA-06 · LESSON 09

Basis-trade strategy

KEY DEFINITIONS

Terms used in this lesson

LP: Liquidity provider: a participant supplying capital under a defined risk-and-revenue arrangement.
Collateral: An asset pledged against a debt; it can be used to cover the debt if agreed conditions are breached.
Proof-of-work target: The maximum header-hash value accepted for a block; lowering it makes valid hashes harder to find.
BTC: The common market ticker for bitcoin.

If Ducat reserves or LPs use a basis trade, the model must include collateral custody, futures margin, funding, roll, liquidation, venue, and convergence risk.

35 min Difficulty 5/5 Not started

VISUAL MODEL

See the whole mechanism before going step by step

Use the diagrams to orient yourself. Then the guided explanation below teaches every part in depth.

4 explanatory views

CONCEPT-SPECIFIC MAP · ducat vaultA Ducat action moves one Bitcoin-anchored vault state to a successorSelect any state to inspect its exact role.

RELATIONSHIP MAPInputs, rule, and outputs

01
PREDECESSORCurrent vault outpoint
The current Bitcoin output anchors collateral and identifies the state being spent.
02
REQUESTBasis-trade strategy
The Basis-trade strategy workflow proposes one exact action and successor state.
03
POLICYProfile, oracle, signatures
Applicable policy, price evidence, authorization, and transaction shape are checked.
04
BITCOIN SPENDScript-valid transaction
Bitcoin miners and nodes can include only a transaction that satisfies Bitcoin rules.
05
SUCCESSORNew outpoint and state
Ducat validators reconstruct debt, collateral, token, and account changes from the confirmed transaction.

Rule shown: Bitcoin checks the spend; Ducat components independently reconstruct and validate the additional protocol state.

STAGE 1 OF 5PREDECESSOR: Current vault outpoint

The current Bitcoin output anchors collateral and identifies the state being spent.

Governing relationship: Bitcoin checks the spend; Ducat components independently reconstruct and validate the additional protocol state. Complete path: 1. PREDECESSOR, Current vault outpoint. The current Bitcoin output anchors collateral and identifies the state being spent. 2. REQUEST, Basis-trade strategy. The Basis-trade strategy workflow proposes one exact action and successor state. 3. POLICY, Profile, oracle, signatures. Applicable policy, price evidence, authorization, and transaction shape are checked. 4. BITCOIN SPEND, Script-valid transaction. Bitcoin miners and nodes can include only a transaction that satisfies Bitcoin rules. 5. SUCCESSOR, New outpoint and state. Ducat validators reconstruct debt, collateral, token, and account changes from the confirmed transaction.

1. State transitionWhat exists, what changes, and what results

BEFORE

For teaching only, buy 1 BTC spot at $100,000 and short one matched three-month future at $103,000. Assume $100 spot fee, $103 futures fee, $50 custody, 2 percent annual fina…

MECHANISM

Choose quantities and contract multipliers so first-order BTC price moves approximately offset.

AFTER

The trade earns its modeled basis only if both legs remain intact through convergence. Interim margin needs can terminate it even when the expiry arithmetic would have been p…

Text equivalent: Starting from For teaching only, buy 1 BTC spot at $100,000 and short one matched three-month future at $103,000. Assume $100 spot fee, $103 futures fee, $50 custody, 2 percent annual financing for three months, $15,000 initial futur… The mechanism begins when Choose quantities and contract multipliers so first-order BTC price moves approximately offset. The resulting lesson is The trade earns its modeled basis only if both legs remain intact through convergence. Interim margin needs can terminate it even when the expiry arithmetic would have been profitable.

2. Mechanism pathSelect a stage to inspect its job

STAGE 1 OF 4

Match spot and futures exposure

Choose quantities and contract multipliers so first-order BTC price moves approximately offset.

Complete path: 1. Match spot and futures exposure: Choose quantities and contract multipliers so first-order BTC price moves approximately offset. 2. Calculate gross basis: Compare futures sale price with spot purchase price over the chosen expiry or funding period. 3. Fund the path: Model collateral custody, futures margin, variation margin, financing, funding payments, and roll costs over time. 4. Stress failure before convergence: Basis widening, venue default, collateral haircuts, liquidation, execution mismatch, and inability to transfer capital can realize losses before expiry.

3. Rule and failure boundaryWhat accepts the result and where it can stop

ACCEPTED PATH

The worked case executes the named inputs and checks in the displayed order. Basis widening, venue default, collateral haircuts, liquidation, execution mismatch, and inability to transfer capital can realize losses before expiry.

CHANGED CONDITION

A missing, malformed, stale, unauthorized, or inconsistent required input stops at its first named boundary. Directional exposure can be reduced while basis, funding, margin, liquidity, venue, custody, execution, and operational risks remain.

Important distinction: Market neutral means risk free. Directional exposure can be reduced while basis, funding, margin, liquidity, venue, custody, execution, and operational risks remain.

Text equivalent: The accepted path is enforced by The worked case executes the named inputs and checks in the displayed order. Basis widening, venue default, collateral haircuts, liquidation, execution mismatch, and inability to transfer capital can realize losses before expiry. If the required condition changes, A missing, malformed, stale, unauthorized, or inconsistent required input stops at its first named boundary. Directional exposure can be reduced while basis, funding, margin, liquidity, venue, custody, execution, and operational risks remain.

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Learn the idea

A cash-and-carry basis trade buys spot bitcoin and shorts similar futures exposure to target the futures premium rather than bitcoin direction. If Ducat reserves or LPs use it, custody, margin, funding, roll, venue, liquidation, and convergence risks remain.

GUIDED EXPLANATION1/4 ideas inspected

Match spot and futures exposure

Choose quantities and contract multipliers so first-order BTC price moves approximately offset.

The worked example follows the explanation

Inspect every idea above to open it.

Important distinction“Market neutral means risk free.”

Directional exposure can be reduced while basis, funding, margin, liquidity, venue, custody, execution, and operational risks remain.

FINISH LEARNING FIRST

The questions unlock after every required learning activity

Inspect every guided idea, open the worked example, rebuild its mechanism, and complete the deterministic lesson tool. Your progress is saved automatically.