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Executive Summary

Crypto derivative markets in BTC and ETH remain fragmented across centralized and decentralized venues, which creates intermittent, exploitable dislocations between options, futures, and perpetual swaps. The most durable opportunities center on put–call parity (conversions/reversals), synthetic futures priced via call–put spreads, box spreads (implied funding/interest), and basis/carry (spot vs. futures/perps)—with deep ITM options acting as futures proxies when delta ≈ 1. In practice, the edge comes from execution—low fees, automation, and cross-venue funding/basis capture—rather than “free money.” Risks that compress returns include fees/slippage, funding flips, legging/latency, margin/liquidation, and venue/contract risk, so robust infrastructure and capital management are essential. Put simply: opportunities are real, but they reward operational excellence more than idea novelty. :contentReference[oaicite:0]{index=0} :contentReference[oaicite:1]{index=1} :contentReference[oaicite:2]{index=2}

Market Landscape (CEX vs DEX)

Liquidity and discovery concentrate on CEXs (e.g., Deribit for options; Binance/OKX/Bybit for perps and quarterlies), while DEXs (e.g., dYdX, GMX, emerging on-chain options) can exhibit slower price updates and oracle-driven quirks. The consequence is persistent—if fleeting—price divergence across venues and instruments, especially around expiries, high funding regimes, and volatility spikes. CME and onshore venues add a regulated tier whose basis/funding often diverges from offshore markets. :contentReference[oaicite:3]{index=3} :contentReference[oaicite:4]{index=4}

Core Arbitrage Playbook

1) Put–Call Parity (Conversions & Reversals)

  • Idea: Enforce C − P ≈ F − K on same strike/expiry; when violated, lock a carry spread using options vs spot/future on the same venue to minimize leg risk. :contentReference[oaicite:5]{index=5}
  • When it pops: Around expiries; skew dislocations; thin strikes (deep ITM/OTM). :contentReference[oaicite:6]{index=6}
  • Note: Deep ITM options (delta ~1) behave like futures, making parity checks cleaner. :contentReference[oaicite:7]{index=7}

2) Synthetic Futures vs Listed Futures

  • Idea: Price of synthetic future via K + (Call − Put) vs actual futures/ perp; capture the spread intra- or cross-exchange. :contentReference[oaicite:8]{index=8}
  • Edge: Funding/basis shocks often move perps faster than options; synthetics can lag, creating small, repeatable clips. :contentReference[oaicite:9]{index=9}

3) Box Spreads (Implied Funding)

  • Idea: Long (or short) box to lend (or borrow) at the option-implied rate; arb against perp funding or futures term structure. :contentReference[oaicite:10]{index=10}
  • When it pops: Volatility shocks and crowded directional positioning skew implied carry vs perp funding. :contentReference[oaicite:11]{index=11}

4) Basis / Crypto Carry (Spot vs Futures/Perps)

  • Idea: Cash-and-carry (long spot/short future) when contango is rich; reverse when backwardated. Options (deep ITM calls) can substitute for spot to improve capital efficiency. :contentReference[oaicite:12]{index=12}
  • Twist: Cross-venue (e.g., CME vs offshore) and CEX-DEX basis persist due to margin, access, and oracle frictions. :contentReference[oaicite:13]{index=13}

BTC & ETH: Where the Edge Shows Up

  • BTC: Deepest options/futures liquidity; parity gaps are smaller but frequent micro-dislocations occur during funding spikes and large expiries (max-pain dynamics). :contentReference[oaicite:14]{index=14}
  • ETH: Historically shows more parity violations and IV surface kinks, offering slightly better frequency for small parity/synthetic clips—size constrained. :contentReference[oaicite:15]{index=15}
  • Cross-market: Deribit options vs Binance/OKX perps is a common hedge pairing; CME adds a regulated leg with distinct basis behavior. :contentReference[oaicite:16]{index=16}

Execution & Infrastructure

  • Fees & routing: Favor maker flow/rebates; pre-position collateral; use multi-leg/atomic order tools where available. :contentReference[oaicite:17]{index=17}
  • Automation: Real-time parity and synthetic monitors; smart hedgers that choose futures vs perps based on funding/latency. :contentReference[oaicite:18]{index=18}
  • CEX–DEX bridge: Dedicated nodes/mempool awareness reduce MEV/latency on-chain; keep sizes realistic vs pool depth. :contentReference[oaicite:19]{index=19}

Key Risks & How to Mitigate

  • Legging & slippage: Use same-exchange legs when possible; otherwise stagger with protective deltas or reduce size. :contentReference[oaicite:20]{index=20}
  • Funding flips: Model funding scenarios; cap horizon or switch hedge instrument if funding turns. :contentReference[oaicite:21]{index=21}
  • Margin/liquidation: Maintain buffers; prefer portfolio margin venues for multi-leg recognition. :contentReference[oaicite:22]{index=22}
  • Venue/protocol risk: Diversify counterparty exposure; for DEXs, assess oracle design and audit trail. :contentReference[oaicite:23]{index=23}

Quick-Start Checklist

  1. Stand up a parity/synthetic scanner (per expiry/strike) and a basis monitor (CEX/CEX, CEX/DEX). :contentReference[oaicite:24]{index=24}
  2. Define fee/funding thresholds (net of taker/maker, gas) and hard stops for execution latency. :contentReference[oaicite:25]{index=25}
  3. Pre-fund key venues; enable portfolio margin; script multi-leg orders to minimize leg risk. :contentReference[oaicite:26]{index=26}
  4. Start with tight sizes on high-liquidity BTC/ETH expiries; expand only if fills/slippage stay inside model. :contentReference[oaicite:27]{index=27}

Notes & Attributions

This consolidated guide synthesizes: (i) a deep-dive on options–futures arbitrage mechanics with ITM focus, (ii) contango/basis and synthetic pricing observations with 2025 context, and (iii) an institutional-grade analysis of cross-venue execution, risk, and infra requirements. :contentReference[oaicite:28]{index=28} :contentReference[oaicite:29]{index=29} :contentReference[oaicite:30]{index=30}

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