Cash-and-Carry Basis Trade: Lock In the Basis

The Gap That Pays You to Wait

A quarterly futures contract has a fixed settlement date. At that moment its price must converge exactly to spot — there is no more time value, no more uncertainty, just delivery. So any gap between the futures price and spot today, called the basis, is a return that gets paid out as that gap closes. If you can capture the basis without taking a directional bet on the underlying, you have a market-neutral yield. That trade is cash-and-carry, and it is one of the oldest arbitrages in finance.

In crypto, Bitcoin and Ethereum quarterly futures regularly trade at a premium to spot when sentiment is bullish, opening a basis worth harvesting. This guide explains how the basis works, how the cash-and-carry trade locks it in, and how the basis & cash-and-carry calculator turns a live basis into an annualized yield and a dollar profit.

Contango, Backwardation, and Convergence

The sign of the basis defines the trade:

• Contango — futures trade above spot. Buy the spot asset and simultaneously sell the future. You already hold the asset you bought “low,” and at expiry the future converges down to spot, letting you effectively sell at the higher locked-in futures price. This is the classic cash-and-carry.
• Backwardation — futures trade below spot. The mirror trade: short the spot asset and buy the future. As the future converges up to spot, you capture the same gap in the other direction. This is the reverse cash-and-carry.

The crucial property is convergence: the basis is guaranteed to reach zero at expiry, so if you hold both legs to settlement on the same exchange, the profit is the basis you captured — largely independent of which way the underlying price actually moves in between. That is what makes it market-neutral.

The Formulas

The calculator works out three numbers. Given a spot price, a futures price, and the days remaining to expiry:

• Basis (to expiry) = (futures − spot) ÷ spot × 100%
• Annualized basis yield = basis % × (365 ÷ days to expiry)
• Locked profit at expiry = notional × |basis %| ÷ 100

Annualizing is what makes contracts comparable. A raw basis of 0.5% means something completely different over 30 days than over 90 days — the shorter contract earns that 0.5% far faster, so its annualized rate is much higher. Annualizing each contract separately (basis % × 365 ÷ days) puts near- and far-dated contracts on the same yield footing, which is why the near quarter can show a higher annualized yield than the far quarter even when its raw basis is smaller.

Worked Example

Suppose BTC spot is $60,000. The near quarterly future trades at $60,900 with 30 days to expiry; the far quarterly at $62,400 with 120 days. Both are in contango. The table shows what a $10,000 notional captures.

Contract	Spot	Futures	Basis	Days	Annualized	Locked Profit ($10k)
BTC — Near Quarter	$60,000	$60,900	+1.50%	30	+18.25%	$150.00
BTC — Far Quarter	$60,000	$62,400	+4.00%	120	+12.17%	$400.00

The near contract’s basis is (60,900 − 60,000) ÷ 60,000 = 1.5%, annualized to 1.5% × 365 ÷ 30 = 18.25%. The far contract has a bigger raw basis (4%) and locks in more dollars ($400 on $10k), but its annualized yield is lower at 12.17% because you wait four times as long for it. This is the near-vs-far tradeoff the calculator surfaces: the far contract pays more in total, the near contract pays faster per unit of time. In contango you run the cash-and-carry — long spot, short the future — and the locked profit is the basis, whichever way BTC drifts before expiry.

How to Use the Basis & Cash-and-Carry Calculator

The tool pairs a live basis table with a calculator, both refreshing automatically every 60 seconds:

1. Live Basis table. The left panel shows all four tracked contracts — BTC and ETH, near and far quarter — with live Spot, Futures, Basis, Annualized, and Expiry (days remaining). Green means contango, red means backwardation. Scan it to see which contract offers the richest annualized yield right now.
2. Contract. In the calculator, pick one of the four contracts (BTC or ETH, Near or Far Quarter).
3. Notional ($). Enter the dollar size of the position you would put on. The default is $10,000.

The result panel then returns the Annualized Basis Yield, the Locked-In Strategy (cash-and-carry in contango, reverse cash-and-carry in backwardation), the Basis (to Expiry) percentage, the Locked Profit at Expiry in dollars for your notional, and the Days to Expiry. Together these tell you the yield, the trade to run, and the concrete dollar payoff of carrying it to settlement.

Is It Really Risk-Free? The Honest Answer

Cash-and-carry is close to risk-free only if both legs sit on the same exchange, your margin cannot be forcibly liquidated before expiry, and you actually hold to settlement rather than closing early. In practice you still carry:

• Counterparty risk — the exchange itself must remain solvent and operational through expiry.
• Margin risk — if the short-future leg moves against you before convergence, you can face a margin call even though the trade is profitable at expiry.
• Execution risk — slippage opening both legs eats into a basis that is often only a fraction of a percent.

Real-world traders treat it as low-risk, not zero-risk. The basis trade is also distinct from perpetual funding arbitrage: this one profits from a fixed-expiry convergence, whereas perpetuals have no expiry and pay through funding instead — see the funding fees guide and the funding rate income guide for that related, ongoing yield.