Delta Exchange Launches Calendar Spread Contracts on Bitcoin Futures

Delta Exchange is excited to announce the launch of Calendar Spread Contracts on Bitcoin Futures with up to 200x Leverage. You can check the contract here. Bitcoin spread contracts will margin and settle in USDT. Traders can deposit USDT to their accounts or convert BTC to USDT on Delta Exchange to trade these contracts. USDT quoting will allow traders to easily lock in the desired dollar spread, via limit orders, without worrying about the price of Bitcoin.

Calendar spread contracts listed on Delta Exchange allow traders to trade the price difference between Bitcoin futures on two different maturities. By taking a position in the spread contract a trader takes offsetting positions in futures on two different maturities. Hence, if you are long the Dec-Sep calendar spread, then you are long the December future and short the September future. Similarly if you are short the spread, then you are short the longer dated future and long the shorter dated future.

These contracts will allow traders to trade the mispricing between the shorter dated and longer dated futures. Thus, if a trader's view is that the spread between two maturities is going to rise, then they should go long the spread, but if they are of the view that the spread is going to converge they should instead sell the spread. The order-book on calendar spread contracts on Delta represent the price at which traders are willing to buy or sell the difference between futures on two different maturities.

The advantage that the spread contracts provide is that you are not required to margin on both futures separately. The gains on one leg are used to offset the losses on another. This makes the trade more capital efficient, cheaper to margin and easier to manage, as one does not need to worry about liquidation on the loss-making leg. In short, the spread contracts have portfolio-margining inbuilt, which allows traders to trade large size with a small balance.

One should note that the calendar-spread contract listed on Delta represents the spread between futures listed on Delta. However, though the individual futures, listed on Delta, are inverse contracts and settled in Bitcoin, the calendar-spread contract is a vanilla contract and settled in USDT. The reason to keep the calendar-spread contract a vanilla contract is that the vanilla contracts allow for USD quoting of spread per BTC or for 1 bitcoin notional. This makes it easier for a trader to calculate and relate to their PnL, which is simply given as exit_spread - entry_spread. Note that this formula is independent of the entry price on individual legs and is only sensitive to the price of the spread at entry and exit. This flexibility is not available with inverse contracts, hence we have decided to keep our spread contracts vanilla. Given that the individual legs on Delta are inverse and that the spread contract is vanilla, having a position in a spread contract does not mean that you will have a naked position in the longer dated future, when the shorter maturity future expires. The calendar spread contracts on Delta expire when the shorter maturity futures expire. Hence if you want to roll your position from shorter to a longer maturity, then taking a position in the spread contract (roll) will NOT do that automatically. You will be required to close/expire the shorter maturity future position and open a fresh position in the longer dated future. The primary use-case for trading the spread-contract currently is to speculate on the mispricing between futures on different maturities, this contract solves that problem and offers a margin efficient way to do so. Stay tuned on our Telegram group for future updates and announcements.

Risk warning: Trading Futures can be a highly risky endeavor. Although trading can yield significant profits, in the cases of extreme price movement and volatility, Delta Exchange reserves the right to liquidate margin balances. Happy Trading! Delta Exchange Team.

Frequently Asked Questions (FAQ)

Q1: What are calendar spread contracts on Bitcoin futures and how do they work?

Answer: A Bitcoin calendar spread contract represents the price difference between two futures contracts on the same asset with different expiry dates. Rather than trading price direction, you are trading the spread between near-term and far-term futures, which tends to be far more stable.

Q2: What is the advantage of trading calendar spreads over regular Bitcoin futures?

Answer: Calendar spreads are far less volatile than outright futures because directional BTC moves affect both legs at the same time. This makes them well suited to mean-reversion strategies and basis arbitrage, and they generally require less emotional discipline than trading directional positions outright.

Q3: How does portfolio margining work for calendar spread contracts on Delta Exchange?

Answer: Delta Exchange applies portfolio margining to calendar spreads, recognising that the long and short legs offset each other's risk. This results in meaningfully lower margin requirements compared to holding two separate futures positions, which improves capital efficiency for spread traders considerably.

Q4: What does it mean to go long or short on a Bitcoin calendar spread?

Answer: Going long a calendar spread means you expect the far-dated contract to rise relative to the near-dated one, so the spread widens. Going short means you expect it to narrow. Neither position requires a view on which direction BTC price itself will move.

Q5: How can traders profit from mispricing between Bitcoin futures maturities using calendar spreads?

Answer: When the spread between two maturities diverges from its theoretical fair value due to liquidity imbalances or sentiment shifts, traders can enter and profit as it reverts. Delta Exchange offers calendar spread contracts specifically designed for this kind of low-directional-risk strategy.

Q6: What happens to a calendar spread contract when the near-leg futures contract expires?

Answer: When the near-leg expires, the calendar spread position is closed or settled based on the final mark price at expiry. Any residual far-leg exposure can then be managed independently. Delta Exchange handles expiry mechanics transparently, with settlement terms published in the contract specifications.