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Strategies & Market Trends : John Pitera's Market Laboratory
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To: John Pitera who wrote (20440)11/23/2017 10:48:09 AM
From: Stoctrash1 Recommendation

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John Pitera

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Happy & Safe Holiday to all...
While you are all digesting the yummy goods...some CME Bitcoin strategies to ponder:

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Gap RiskThe CME does not trade over the weekend. Longs or shorts depending on the price action over the weekend, could be insta-rekt when the exchange reopens Sunday night US time.

Interactive Brokers, one of the CME’s clearing members, expressed severe reservations about this product due to the high volatility. They are scared shitless about how to deal with underwater shorts. It is not impossible for Bitcoin to gap up 100% in a matter of hours on positive news. Imagine what will happen when an ETF finally is approved.

BitMEX deals with gap risk via Auto-Deleveraging. The CME at the present moment cannot employ a socialised loss feature. Instead, clearing members must pony up the cash. That is why they are being such scaredy cats.

Depending on your broker, margin requirements for short positions could be extremely unforgiving. This will push CME basis up even further, and make putting on the spread trade described above, even more expensive.Are You Yellow?Arbitraging BitMEX vs. the CME requires a high level of trading sophistication and attention to detail. The different margin currencies and policies present many opportunities to transform what is a sure profit into a massive loss.

However, owing its the difficulty, these spread trades will be juicy. For students of markets, this is an arbitrage opportunity of a lifetime. Those who put in the time to perfect these strategies, will profit handsomely.

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