On the market strategy of Bitcoin Futures (1)

Today I would like to share with you some of the strategy of Bitcoin futures. "Market-making strategy" is the most famous one in the strategy, where I want to share some of my experiences with my own thoughts.

Now let's start with the concept.

One, what is to do the city strategy

The market-making strategy (Market-maker strategy) is a risk-neutral (risk-neutral) handicap spreads arbitrage strategy. The basic principle is: between Handicap's selling one and buying one price, inserts the committee to pay the bill and the Committee sells the list, if inserts two list all trades, the market maker has eaten the price difference between the purchase and sale orders, but after the whole process completes, the market maker's holding position has not changed. If the price difference between the sale and purchase orders is deducted from the various transaction fees and then there is a surplus, then the market maker gains the corresponding profit.

Market-making strategy is a strategy to increase the liquidity of the exchange, in general, the mature trading market in order to enhance their liquidity, will use low commission (even for market makers to provide liquidity incentive) method to attract market makers to do the city.

Ii. matters needing attention in making the city strategy

1 Choice of the time to make the city

A market maker is essentially a counterparty to the entire marketplace. If the market appears to be a sharp unilateral market, the seller will be issued by the sale of orders would be a large probability of unilateral transactions, so market makers will accumulate a large number of risk positions, this is the market maker do not want to bear the risk. Therefore, market makers in the choice of whether to do the city order before, will be a preliminary judgment of the trend of the markets, if the market in a short period of time to show a very obvious trend of signal, manufacturers will correspondingly reduce their own market number (or even stop doing the city)

2 Disposal of net positions

The cumulative net position of the market maker can be dealt with in a number of ways, two of which are listed below:

(1) to dispose of the accumulated net position in the next market. For example, market makers currently have a net position of 2BTC, the next time to do the market, he can be issued a sale of 3BTC sales orders, a buy 1BTC of the committee to pay. The advantage of this approach is that net positions can be dealt with in a timely manner, with the disadvantage that the timing (price) of net position processing may not be optimal.

(2) The second method is to open another separate procedure, to calculate the accumulated net position and then to 1+ the position in the market according to the cost price * (a certain proportion of the profit margin), and two kinds of methods are thrown out: a. By limit orders from the price of superior to the price of the poor in turn to throw out the market, timeout does not deal with the part of the withdrawal of the list, waiting for the next opportunity; First, according to price orders from the price of superior to the inferior in turn to throw out the market, timeout does not deal with the part, then the market order to dump goods. The advantage of the first method is that the cost of the goods can be controlled, but the period of dumping may be long; the second method can effectively control the time of the dumping, but the cost is not controllable, which is superior to the inferior, need to market makers according to their own risk preferences carefully considered.

treatment of 3-period goods exchange contract (shift warehouse)

Futures contracts have a maturity date, at the end of the expiration hours, we do not recommend the market maker to continue to do the market, but use these hours, will be expiring futures contracts to move the warehouse. The move is to flatten the current futures contract and then open the same position next week. Of course, the relocation also needs to consider the cost. If the current position is a long one, then we hope that the point of shift is in the next week futures paste the most severe time, on the contrary, we would like to move the time point is the next week in the futures of the most severe time. After the relocation, the market strategy continues to resume execution.

The concept of a simple introduction to here, I will continue to share for you to do the city strategy, but also welcomed the message discussion.