CMFDH II — Fund Capacity Analysis
People ask how much money we can handle without harming performance. Here are our estimates of scalable deployment of dated futures & covered calls without performance degradation — October 2025.
Summary Conclusion
Our research confirms CMFDH II can confidently scale to approximately $100 million AUM without materially degrading performance or increasing execution slippage. This conclusion is grounded in verified cross-venue liquidity (CME, Deribit, Binance, Kraken, BitMEX) and in-house quantitative analysis.
Scope clarification: The $100,000,000 capacity figure is based solely on available public data from centralized exchanges (order books, volumes, and open interest). However, behind these venues operates a network of institutional market makers whose balance sheets and credit lines can significantly increase the executable volume in normal conditions. Visible bids/asks do not necessarily reflect total deployable “dry powder” in the marketplace, which can be accessed via blocks, RFQs, and liquidity programs.
1) Strategy Allocation
| Strategy | Allocation | Description | Primary Venues |
|---|---|---|---|
| Cash-and-Carry Arbitrage | $50 million | Buy spot BTC/ETH and sell dated futures to capture the term-structure premium (contango). | CME, Binance, Kraken, BitMEX |
| Covered Call Writing | $50 million | Hold BTC/ETH and sell out-of-the-money calls for yield enhancement. | Deribit, CME |
This dual-alpha structure provides complementary exposures, smoothing returns across market regimes.
2) Market Liquidity & Capacity
| Exchange | Product | Typical Daily Volume (USD) | Open Interest (USD) | Fund Share of Market |
|---|---|---|---|---|
| Binance | Dated BTC/ETH Futures | >$14B | >$11B | <0.4% |
| CME Group | BTC Futures (all maturities) | $10–20B | $39B (record Q3 2025) | ≈0.1–0.2% |
| Deribit | BTC Options | ≈$4.6–5.8B | >$48B | <0.1% |
| Kraken & BitMEX | BTC/ETH Futures | $0.5–1B | $0.5–1B | Supplemental |
Sources: Exchange reports, CME Group data, Deribit Insights, NLC internal analysis.
3) Dated Futures Capacity (Cash-and-Carry)
- CME Dec 2026 BTC futures show ~10,000–20,000 contracts OI (~$1–2B notional).
- $50M position ≈ 4,200 contracts (~417 BTC) → <0.2% of total OI.
- Average CME bid-ask ~11 bps; offshore venues often tighter; algorithmic multi-venue execution keeps slippage <0.05%.
- The market has absorbed single-day forced unwinds of $19–$40B without structural impairment.
4) Options Capacity (Covered Calls)
- Deribit maintains ≈80–85% share of BTC/ETH options OI; platform OI peaks >$40–50B.
- 2026 expiries hold multi-billion OI; CME options add ~$8B regulated OI.
- Daily options turnover >$5B supports staggered premium sales across strikes/expiries.
5) Structural Risk & Execution
- Both strategies are fully collateralized — no liquidation risk.
- Counterparty risk mitigated via multi-exchange diversification; partial CME usage adds regulated clearing.
- CME’s upcoming 24/7 trading in 2026 expected to expand depth by ~20–30%.
6) Performance Scalability (Modeled)
- Scaling $1M → $100M reduces returns marginally (~2–3 bps per +$10M) due to deep liquidity.
- Projected (at scale): IRR ≈ 60–65% (net), Sharpe ≈ 1.6–1.8, Max Drawdown <7%.
7) Final Assessment
| Metric | Result | Basis |
|---|---|---|
| Total capacity without degradation | ≈ $100M | Aggregate liquidity analysis |
| Headroom before >0.5% slippage | $125–150M (projected) | Depth modeling |
| Preferred split | 50% futures / 50% options | Balanced alpha |
| Operational limiter | Counterparty concentration | Mitigated via multi-venue |
Works Cited
- CME Group Quarterly Cryptocurrency Insights, Oct 2025
- Deribit Insights: Crypto Derivatives Analytics
- Internal analysis by Nicholas Levenstein & Company, 2025.