Contract trading is the nice pastry within the eyes of the exchange, and everything parties are competing for entrance. However, you can find very few that can really experiment.
Contract trading is also a “solution to obtain wealthy” by many retail investors. Nevertheless, after all, there are still several who obtain rich.
For exchanges and traders, is there even now an opportunity within the contract market?
On Sept 20th, Lin Jiapeng, the founder of Linkvc & BBX investor, visited the Planet Chaohua Community to explain in detail the “Wealth Guidebook for Efficient Use of Contract Derivatives”.
Lin Jiapeng believes the contract market is more often used for speculation, but speculation isn’t gambling. It is important is to handle the mentality. “We are able to even use contract trading as an area to try out, but there’s an additional option to proceed short.”
Concerning the fourth quarter market, Lin Jiapeng also said that he is very optimistic about the fourth quarter. “There are two main reasons. The launch of the compliant swap dominated by Bakkt symbolizes that massive levels of funds within the popular market will tend to be injected in to the market. And Bakkt will be physically delivered, unlike CME (Chicago Mercantile Exchange) Exactly the same is true for your limitless shorting of the united states buck without btc. The next reason is that following year’s halving is about to usher in the market. The historical period prior to the halving has been volatile and rising.”
Lin Jiapeng, Linkvc founder & BBX investor; entered the blockchain sector in 2013, co-founded the blockchain market software Aicoin, and has served as a expert for Okcoin for a long time; the founder of the blockchain technology service provider Tiger Cloud Trading System.
The following is a record of Lin Jiapeng’s speech, organized by:
One or 3 types of expense structure. One understanding you think will be useless, in fact, it is because you can’t utilize it. I think making good use of agreements and related derivatives is one of the essential skills in a lifetime. Many people state that why A shares cannot rise and develop poorly because there is no short-selling tool. Those who state this basically don’t possess common sense. There’s a product called stock index futures. You can understand that this is a legal and compliant regulated contract exchange in the country. Today I am sharing here not merely the contract, but also a trading believing mode.
Before discussing contract trading with you, I’d like to speak about what investment design is. Lots of people are scornful of contract transactions, convinced that contract transactions are like gambling. I am hoping that after I finish discussing investment framework, everyone can take a look at contract transactions even more objectively.
The investment structure could be split into three types:
- Uncertain distinction between set market
This is easy to understand. What is a market? A market is a market. For instance, the BTC/USDT market of BBX is a market. What’s the distinction? The difference is the worth I be prepared to rise.
The investment structure used by most users is a fixed market variable margin. For instance, I purchased 1 BTC within the BBX place market BTC/USDT at a price of 10,000 USDT, and expected to rise to 12,000 USDT, and the marketplace balance should come out.
- Uncertain market
This can be a brick-moving arbitrage that is often said within the circle. Let’s clarify the idea of the marketplace. BBX’s BTC/USDT place market and okex’s BTC/USDT place market are two markets. This is the particularity of our industry. The marketplace depth of each exchange is impartial, unlike our big A shares, that are propagated by all brokers. The depth of the Shanghai STOCK MARKET or the Shenzhen STOCK MARKET is also for this reason, which is why our industry offers moving arbitrage.
In 2017, the profit margin of spot moving bricks was large, but it isn’t working now. The reason is simple. If you can find more people moving bricks, everyone will not make money.
- Set the marketplace and fixed the difference
This may be far away from our ordinary users. This plan is mainly due to the fact that you will see more users over the project side, which is a investing strategy. I will not give much intro here.
In principle, all trading strategies could be classified into among the above three types. We go through the shortcomings of place transactions from your perspective of expense structure.
The market is certainly going along. Now the price tag on BTC is at 10,000 US dollars. Your expectation is that the price will fall to 8,000 US dollars in the foreseeable future. As a trader who is scornful of the contract, he decisively chooses to sell at 10,000 US dollars and see that the market cost is really as if you. The wish dropped to 8,000 US dollars, secretly pleased to escape. However, another investing user who is also bearish chooses to brief BTC at a price of 10,000 US dollars in the contract market, and the ultimate profit should be additional money (the foreign currency is earned and there’s room for understanding)
Quite simply, if you are a investor with uncertain market margins, the contract offers you one more trading direction. Theoretically talking, earnings expectations are in least doubled.
Let’s discuss the technique of uncertain market. As mentioned previously, there is generally little area for arbitrage in the spot market. How about the contract market?
In the initial 1 / 2 of 2018, BBX released a perpetual contract. That is because other domestic exchanges except ok do not support contract trading. Unlike right now, there are several pure place exchanges. Recently, there is a well-known saying within the swap industry that if you don’t get a contract, you will perish, and if you get a contract, you will perish quickly. This is the stress and anxiety of exchanges. why?
Contract exchanges burn money very much, mainly from 2 aspects.
One is advancement and servicing. The complexity of the is n moments that of an area exchange and takes a very professional technical team.
Another is market making and liquidity management. Contract trading includes its leverage, which takes a high level of depth. When the market is poor, nobody will play it. If the marketplace is good, it is very tough to be disappointed. Exchanges with weakened financial strength are very prone to bankruptcy. In terms of market making, it’s quite common for exchanges to reduce millions.
At the end of 2018, we also launched the Tiger Contract Cloud service. If the exchange wants to connect, it can be accessed when one week. The Tiger Cloud counter and depth are complete, also it may be used after receiving it. It generally does not need to create, maintain and market on your own Up. At present, more than 20 popular exchanges have used the services supplied by Tiger Agreement Cloud, and everyone’s propagated liquidity is currently in the very best 5 in the world.
In line with the fact that each contract exchange has to do market to supply liquidity, this naturally brings opportunities for arbitrage within the contract market. Now I am aware that lots of quantitative groups or individuals are already achieving this. Which are the opportunities for stable profitability for our ordinary users?
The location rules are uniform for each exchange, however the contracts will vary. Contracts could be roughly split into three types: okex delivery contract, bitmex perpetual contract and BBX USDT perpetual contract. The next exchanges also produced some micro innovations predicated on these three types.
- Contract arbitrage technique There are three main arbitrage strategies within the contract market:
- Funding expenses of perpetual contracts
Within the contract market, as well as the basic spreads between different platforms, a large area of the potential gain comes from capital expenses.
Perpetual contracts rely on capital prices to maintain an equilibrium between longs and shorts. Financing fees are exchanged between customers and users based on the market’s long-short sentiment, that is not available over the platform. Because the lengthy and brief sentiments of different markets will vary, the fund prices in different marketplaces will vary, with higher and low, negative and positive, which naturally brings arbitrage opportunities.
Funding price itself is also the best indicator to guage the strength and sentiment of the marketplace.
Let me discuss among the easiest ways to make money on capital costs. The opportunity could be said to be without any danger. The bull market has soared. Once the market all together will be bullish, the financing rate at this time will basically end up being high, which means that long positions have to pay higher funding expenses to short positions at this time. At this time, we can look for a variety with the highest funding rate within the BBX currency-based contract. Shorting the positioning of the contract equivalent to the foreign currency price, so that we can usually charge funds. I believe most investors remain based on the yellow metal standard, which method is a steady profit over the yellow metal standard. Another advantage is that just arbitrage in an acceptable market such as for example bbx, okex, etc. is fine.
- The price distinction between the perpetual contract as well as the delivery contract
Digital currency is defined as a risk asset, and skyrocketing and falling phenomena occur from time to time. The spread between the delivery contract as well as the perpetual contract often goes in one intense to another, and there is a lot of arbitrage space.
Many users on OKex are employing this method to attain steady arbitrage. Because both perpetual contract as well as the delivery contract have the same transaction target, the price must be close at a particular point in time.
- The price distinction between the contract and the spot (leverage) (present arbitrage, upcoming arbitrage)
The bull market has skyrocketed. When market sentiment will be dominated by bulls, it is possible to have a large spread between the contract and the spot. At this time, we can elect to buy in the spot market, short within the contract market, and total arbitrage once the spread is close. Of course, we can furthermore use place leverage to go short within the slumping market, go long within the contract market, and achieve steady arbitrage, that is essentially the same.
Of course, the contract arbitrage also offers its limitations. The chance is small, and it also brings a low rate of come back, and has certain requirements on the main, which is suitable for traders with fairly large capital to participate.
The contract market is more used for speculation. Speculation isn’t gambling. It is important is to handle your mentality. I usually think trading is a quite interesting thing, I really like it very much, and believe that it is a profession that can be pursued for life.
Of course, I am not here to encourage you to take a position. I believe there are still many people who like trading. We are able to even use contract trading as an area to try out, but there’s an additional option to proceed short.
- Choosing the contract? What I want to state next will be, if speculation, which contract should I choose?
The initial intention of the look of the delivery contract is actually to design the hedging company for miners. More desirable for some institutions.
The initial intention of the perpetual contract is actually direct speculation between users, that is more suitable for ordinary investors.
Both ok delivery contract and bitmex’s perpetual contract are based on the currency standard, that is not easy to comprehend when calculating the revenue and loss, however the USDT contract on BBX doesn’t need it. USDT offers less volatility and may better measure contract profit and reduction situation. For instance, you intend to brief TRX on BitMEX. You can only sell brief with BTC, but if BTC furthermore falls, even if you do the right direction, it will still create a loss of primary. But making use of USDT as contract margin will not have this problem, brief TRX, so long as TRX drops, you’ll get USDT income.
I believe you curently have a particular understanding of the essential concepts of agreements. Now let me discuss the deterministic opportunities. First, let’s take a look at a picture.
This is the fj contract that was once online on BBX. That which was the effect? It slipped 90% in less than 24 hours.
Let’s go through the first Huobi ieo project that was once very popular-TOP. This time there is no active announcement, but someone broke the news in the community, and the effect plummeted by 20%.
This is the deterministic opportunity of the marketplace I am talking about. Contracts aren’t only speculation but a skill. Why these tasks have fallen a lot very quickly is because their pricing and valuation are unreasonable.
TOP is a project that is not the mainstream NEEQ project, and Liang Jingru from any nation cannot give him an excessive valuation. All you need to complete is to await the market to adjust to a reasonable cost.
Fj is even more excessive, fj is a continuity product after fcoin has relied heavily on information asymmetry to strangle the marketplace on ft. There is absolutely no innovation within the model. All of them are old routines to increase shipments. This time it is even more ruthless. The complete project did not last for 96 hrs, and a group of customers who pursued higher yields were take off.
BBX is currently the most water derivatives trading platform with types of dealings on the complete network. The launch of these two contracts is actually saving the marketplace and accelerating the death of these poor tasks. Many people here may request why they can be brief. Because you can make the price, such as, that is 0.1$ on Huobi, if you can create the price lower by 0.07$, someone might take your brief order. Actually, the user who required your empty order at 0.07$ has recently made 30% within the extra market, because this 0.07$ coin as well as the 0.1$ you purchased on Huobi will be the same thing. A price match can reveal the truth of the project. worth. The contract isn’t actually a price amplifier but a tool for price come back. In the end, a long-short balance will be attained. It is a pity that these two tasks didn’t last a long time before they generally died. There are no players still left. The project whose contract will be undervalued is a rocket dispatch that can rise to an acceptable price quicker. The overvaluation of the contract is a mirror picture of the project, and a prototype will appear ultimately.
As a trader, you have to find more certain opportunities and produce judgments in an increased winning market. The contract market isn’t a zero-sum sport. The so-called zero-sum sport means that the overall joy of the complete society hasn’t improved, and money and benefits are just area of the joy. The contract market is a positive-sum sport, because following a group of institutional preparations, after redistributing dangers, everyone’s joy has been enhanced. This is the essence of the contract market.
I often hear many people state that contracts are gambling, and also many people who participate in speculative dealings think so. The core mistake of this view is they fail to find an essential truth. Contract dealings have redistributed dangers. And gambling generates risks that did not exist.
Mastering the art of contract is actually mastering a wealth direct for a fresh way of thinking. The above is just an introduction. You can think even more about which marketplaces can be produced. The principles will be the same. Many thanks for your interest.
- Planet Q&A Q1: An undeniable fact that can’t be ignored is that almost all retail investors lose cash after playing agreements. Are retail traders really suitable for playing contracts?
Lin Jiapeng: I’ve already portrayed this view perfectly in the posting that I simply shared. Contract can be an art, a means of considering, and a necessary knowledge.
Q2: How do you carry out risk handle during contract procedures? What’s your contract price of return generally?
Lin Jiapeng: The contract isn’t a gambling, we should allocate potato chips and bet in a far more confident market. I participate in speculative products in almost all marketplaces, including but not limited to stock index futures, U.S. shares, commodities, digital currencies, etc. Long-term positive returns.
Q3: There are currently a large number of contract platforms. Which do you think has the greatest experience, depth, and development possible?
Lin Jiapeng: At present, the best experience is certainly okex, which has probably the most reliable techie strength. I believe the most possible exchanges are employing Tiger Agreement Cloud, because everyone shares the depth and they’re real users. At present, more than 10 popular exchanges possess access to services, which includes Matcha, Bitcoin China Korea, Cointiger, DragonEX, etc., and so are currently the greatest liquidity platforms apart from bitmex, okex, and Huobi.
Q4: How can emerging contract exchanges stick out?
Lin Jiapeng: I go through the problem of emerging exchanges. There are a few innovations in the merchandise model, such as for example options. Or with super liquidity, the threshold for latecomers has already been high. For ordinary entrepreneurs, I would recommend never to enter this field.
Q5: What do you think of the marketplace trend within the fourth one fourth and next yr?
Lin Jiapeng: I am very optimistic about the fourth one fourth. There are two main reasons. The launch of the compliant swap dominated by Bakkt symbolizes that massive money in the popular market will tend to be injected in to the market. And Bakkt will be physically delivered, unlike cme, it is possible to short the marketplace indefinitely with dollars without btc. The next reason is that following year’s halving market is about to usher in. The historical period prior to the halving market has been volatile and rising. So I am very optimistic about the market outlook.
Q6: Which platform currency do you prefer?
Lin Jiapeng: Platform currency, I believe mainstream exchanges are very good, okb, ht, bnb, gt are worth configuring. Personally, i choose okb and ht.
Q7: How do i be a qualified contract trader
Lin Jiapeng: My suggestion is to industry with smaller amounts and accumulate experience.