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(I am not a professional investor) Why is there a gap of 11% between the CBOE Future contract price and the BTC Spot price? Should they not be closer in a perf

(I am not a professional investor) Why is there a gap of 11% between the CBOE Future contract price and the BTC Spot price? Should they not be closer in a perfect market? Maybe the gap will be the same on the contract expiry date? Is this because the arbitragers still need to integrate the CBOE Futures into their system? Even between bitcoin exchanges, the bitcoin price varies. $17240 on cex and $16310 on bitstamp.

LrnByTeach 9y ago
Futures contract has TIME value, so they are usually higher than the SPOT price, please check this link for detailed explanation . https://www.investopedia.com/terms/f/futurescontract.asp https://www.investopedia.com/terms/f/futurescontract.asp Thought it is not exactly same, but similar case is Where you pay Premium with Stock Options to have the right RIGHT to buy the stock one month from now. Regarding cex & bitstamp they are exchange out side of USA, each of them have different Risk factors associated to each of those exchanges, that is why that price difference . Coinbase and CBOE are both US based exchanges and are under govt. regulation and are reputable than any other bitcoin exchanges in the world.
- andruby 9y ago
  Is 11% not a huge time value premium for something that expires in a month? Can we compare the time premium with the interest rate? I have traded options, but never futures. With options there several components that increase the premium besides just the time component. According to [0] futures shouldn't have a time premium because both parties are obligated to to fulfill the contract. As you stated in the OP, the 11% spread should be a "riskless" arbitrage. If so, I suspect that this spread will decrease. [0] https://money.stackexchange.com/questions/12359/do-futures-have-premium-in-the-price-just-as-options-do https://money.stackexchange.com/questions/12359/do-futures-h...
  - richardw 9y ago
    > Is 11% not a huge time value premium for something that expires in a month? Not for Bitcoin. You can hit that in a day. I'd be happy to bet we move 11% in one direction or another within 30 days
  - soVeryTired 9y ago
    Yes, -11% carry in a month is absolutely bonkers.
  - omellet 9y ago
    It is a huge premium. In reality it should only be the future value of the current spot, given the current interest rate. For other types of futures (oil, grains) that have storage costs or seasonality there are other factors that affect the difference between the spot and future price, but for financial futures (especially cash-settled) it should be nearly no difference for a one-month expiry.

LrnByTeach 9y ago

Futures contract has TIME value, so they are usually higher than the SPOT price, please check this link for detailed explanation . https://www.investopedia.com/terms/f/futurescontract.asp https://www.investopedia.com/terms/f/futurescontract.asp Thought it is not exactly same, but similar case is Where you pay Premium with Stock Options to have the right RIGHT to buy the stock one month from now. Regarding cex & bitstamp they are exchange out side of USA, each of them have different Risk factors associated to each of those exchanges, that is why that price difference . Coinbase and CBOE are both US based exchanges and are under govt. regulation and are reputable than any other bitcoin exchanges in the world.

andruby 9y ago
Is 11% not a huge time value premium for something that expires in a month? Can we compare the time premium with the interest rate? I have traded options, but never futures. With options there several components that increase the premium besides just the time component. According to [0] futures shouldn't have a time premium because both parties are obligated to to fulfill the contract. As you stated in the OP, the 11% spread should be a "riskless" arbitrage. If so, I suspect that this spread will decrease. [0] https://money.stackexchange.com/questions/12359/do-futures-have-premium-in-the-price-just-as-options-do https://money.stackexchange.com/questions/12359/do-futures-h...
- richardw 9y ago
  > Is 11% not a huge time value premium for something that expires in a month? Not for Bitcoin. You can hit that in a day. I'd be happy to bet we move 11% in one direction or another within 30 days
- soVeryTired 9y ago
  Yes, -11% carry in a month is absolutely bonkers.
- omellet 9y ago
  It is a huge premium. In reality it should only be the future value of the current spot, given the current interest rate. For other types of futures (oil, grains) that have storage costs or seasonality there are other factors that affect the difference between the spot and future price, but for financial futures (especially cash-settled) it should be nearly no difference for a one-month expiry.