Right @misterkel ... so you're trying to say that risk-wise it doesn't matter if a market is regulated or not? What happens if you have a position in options on bitcoin... which are kept in an unregulated account, traded on an unregulated bitcoin exchange... or even bit-derivatives exchange... with (I assume) contract specs that are "set" by this unregulated exchange...what happens if that exchange decides to change the contract specs? What's going to happen if you lose money because of this? It's not regulated... I doubt courts will be very effective... I might be wrong, and it's more regulated then I think... in that case mea culpa. Crypto market is very inefficient and you can probably make some decent crypty money out of it. In your ETH case... I don't now the exchange rules and specs. You mentioned you need to hold long ETH somewhere else, different exchange? What does this mean for margin? What do they charge for this, because I would assume being synthetically short ETH is a high margin play... if possible at all. In which case the 11% premium in a future isn't that strange, since it's a leveraged product that might be hard to short? Lot's of ETF's trade at premiums exactly for this reason... How is the expiry settlement done? Also, being inefficient... what's the possibility of you being squeezed out in this short ETH future? If you're short and ETH gets pushed up in a spike and you have a forced buy-back in the future at a rich level... you might not be able to get out of your long ETH. Because of a highly inefficient market, manipulation is very much possible and therefore a big risk. You mentioned the LIBOR-fixing scandal... if they can do that... don't you think that ETH can bee manipulated on a price level? PS. You never responded - https://www.elitetrader.com/et/threads/futures-underlying-arb.312867/#post-4511054 EDIT. I had a quick look at specs. I assume ETH futures is treated similar to Bitcoin futures. Futures expire base on a 30M TWAP of BXBT... which is 'the bitcoin price'. But as they state on their website: ".BXBT pricing is currently derived from equal parts Bitstamp and GDAX. This composition is subject to change due to unprecedented exchange instability." apparently they can change the composition...
I've got a different opinion on that. You say rammed up the arse... maybe they sold it hard... but anyone in a finance department who is going to engage in financing activities should know what they are doing and should know the working of swaps etc. I don't put the blame on banks, except that they could've made sure the counterparty was better aware of the workings... I put the blame on the idiots that run a finance department of a local government, which in it's own rights is very inefficient and bureaucratic... and let's not forget very susceptible for fraudulent behavior (they are government pencil pushing lazy f#$ckers ). We've got a saying here in Australia... buyer beware...
Not gonna comment on your rant, since it's counterproductive. However, I doubt these municipalities went bankrupt because of the LIBOR manipulation (the manipulation caused deviations of at most a few basis points from the expected value). You can't deny that an "arbitrageur" in crypto currencies is taking on a fair bit of settlement, security and fungibility risk. In case of a futures contract, this adds a event risk - your bitcoin that you are long might change in nature while your are waiting to deliver it (e.g. what if it forks during the period?).
I think he meant the whole interest rate swaps saga that's still ongoing... where clients locked in 'low' rates, but now they are complaining because the rates went even lower... I forgot to mention that one ... 'corporate actions'... yeah, how are those treated... is there any ruling based on that?
https://www.bitmex.com/app/fairPriceMarking#calculation-of-fair-price-for-perpetual-contracts This reads like it's a manipulators dream... The fair price of a crypto future is calculated using "impact pricing", probably to work out where they can hedge the futures trade themselves... so theoretically you could influence the underlyin BTC orderbook in a way that affects their future price calculation... hit the future and delete the BTC orders... if you're fast enough... Technically, that would be 'spoofing' and because it's an unregulated market.... it's totally allowed!!!!
Actually, I think many of these muni issuers have swapped fixed for float and have done OK recieving float in the last years. Of course, those do not complain, it's the ones that decided to hedge their future issuance that are unhappy.
This whole thing is like me buying a new car... driving it for 3 years and put 100kms on it... then there's a more fuel efficient one and demand a full refund because mine is a gasguzzler and they didn't give me a fixed fuel price...
When we did similar trades we got the blessing of the local tax authorities and our lawyers. Every year we would have to wait until the local governments' budgets would come out. It was risk free. Not a retail strategy. Speaking of corporate actions (one of your later posts), there was an arbitrage about 15 years ago that only worked for retail. I don't remember the details but it involved a merger of a pipeline company and how oddlots were treated. I agree with your point on this thread. There really is no arbitrage for retail investors.
Muinicipality and corpation hedging is really shorting puts for the actual people who actually do it.