Arbitrage trading is an investment strategy that capitalizes on differences in an asset’s listed price across different markets. The most common arbitrage strategies in the crypto market include spot-futures arbitrage, funding rates arbitrage, and futures arbitrage. 

What is Bybit Arbitrage? 

Bybit Arbitrage is a trading tool designed to help traders seize short-term opportunities emerging from price disparity in different markets. With Bybit Arbitrage, traders can monitor the order book and liquidity of two trading pairs or contracts concurrently, and place both-leg orders through a streamlined process that ensures greater precision in order fulfillment. 

Bybit Arbitrage offers arbitrage opportunities in funding rates and spreads. 

 

1. Funding rate arbitrage entails placing both-leg orders (with the same amount but in different directions) in Spot and Futures. The rationale is to offset potential losses with potential gains while earning funding fees. In cases where the funding fee is positive, the strategy involves buying in Spot and a short position in Perpetual to earn steady funding fees — termed positive arbitrage. Conversely, when the funding fee is negative, traders can short Spot and long Perpetual to profit from steady funding fees, known as negative arbitrage.

 

Suppose BTCUSDT Perpetual currently has a positive funding rate of +0.01%. Short position holders will receive funding fees from long position holders. Hence, Trader A can leverage Arbitrage tools by simultaneously buying 1 BTC in the Spot Market to profit from price rises and shorting 1 BTC to profit from price drops in the Perpetual Market. This hedging portfolio allows Trader A to balance potential losses in one market with profits from the other, while earning funding fees.

2. Spread Arbitrage involves the simultaneous purchase and sale of an asset in different markets to capitalize on price differentials. 

 

You can use Arbitrage tools to execute a spreads arbitrage by buying and selling the same asset on different markets. For example, If BTC is trading at a lower price in the spot market than the BTCUSDC futures contract, you could buy BTC on the spot market and sell a BTCUSDC futures contract to capitalize on the price difference. This strategy aims to profit from convergence as the futures price will eventually align with its spot counterpart at the contract's expiration.

Currently, Arbitrage tools are only available on the Bybit App, exclusive to UTA users in Cross Margin mode. To upgrade to UTA, please refer to this article. 

 

Bybit Arbitrage supports USDT Perpetual, USDC Perpetual, and USDC Futures. Enjoy arbitrage opportunities across the following trading pairs:

• Spot (USDT) and USDT Perpetual
• Spot (USDC) and USDC Perpetual
• Spot (USDC) and USDC Futures

 

 

 

 

 

Product Highlights 

 

Arbitrage Opportunities: Bybit Arbitrage serves as a quick gateway to identity arbitrage opportunities. The interface organizes trading pairs based on funding rates or spreads, providing traders with a direct visualization of potential arbitrage opportunities.

 

• Ranked by Funding Rate: This feature presents a list of funding rates for different trading pairs in descending order. It offers a clear visualization of the trading pair that currently offers the highest funding rate, allowing traders to capitalize on the funding fees. 
• Ranked by Spreads: The feature presents the market prices of an asset traded across various trading pairs and contracts. Traders can refer to the ranking by spreads to identify and profit from the pairs with the most significant price differential.

 

Trade with Both Legs: Easily monitor price movements and liquidity of two trading pairs on a single interface, and trade both pairs with just one simple click. 

 

Smart Rebalance (Enabled by default): Smart Rebalance ensures your portfolio remains balanced by monitoring filled orders every 2 seconds. If the number of filled orders for one leg differs from the other, Smart Rebalance automatically places market orders to ensure an equal number of filled orders for both legs. Each round of Smart Rebalance will be valid for 24 hours. After 24 hours, any unfilled orders will be canceled. 

 

For example, the Trader places a 1 BTC Buy Limit Spot order for leg A and a 1 BTC Short Limit Perpetual order for leg B. After placing the order, the system will check the transaction quantity of both legs every 2 seconds. Assuming that leg A filled 0.5 BTC and leg B filled 0.4 BTC. At this time, the system will place a 0.1 BTC Market order for leg B to make up for the quantity. Every 2 seconds, the system will perform a check until all orders are completely filled or the effective time of 24 hours is reached.

Over 80 Assets as Collateral: With Unified Trading Account (UTA), traders can use over 80 assets as margin for arbitrage trading. The mechanism of margin for Arbitrage is illustrated below: 

 

• Let's consider the LTP of BTC is currently at 30,000 USDT. With a 30,000 USDT margin in Trader's UTA, Trader can place a Spot order and Perpetual Order concurrently, that is using the 1 BTC spot assets as margin to short 1 BTC in perpetual contract, enabling Trader to profit from positive arbitrage.
• Suppose the Trader is holding BTC in Spot. If the spread between BTC Spot and back month widens, Trader may use their BTC holdings as margin to create a short position of the same amount in a back month BTC Futures. In such cases, fluctuations in the price of BTC will not increase Trader’s liquidation risks. Traders can profit from the spreads once the BTC Futures expires and the spread diminishes. 

Risks

— Arbitrage is a tool that allows users to place orders concurrently without APIs. It does not guarantee profits and may still expose users to liquidation risk. 

— Smart Rebalance automatically rebalances traders’ portfolios by placing market orders, which may result in price deviation from the price set initially.

— Arbitrage tools do not help users to manage or close their positions. Traders are responsible for actively managing their positions. 

 

 

 

How to Place Arbitrage Orders 

 

On Bybit App

 

Step 1: Head to the trading page, tap Tools and select Arbitrage.

 

 

 

Step 2: Choose the asset for your Arbitrage trade based on Funding Rate or Spreads.

 

 

 

Step 3: Order Placement

 

• Choose either to go long or short of the desired trading pair. The amounts for both legs are always the same but in opposite directions. Our system will automatically determine the direction of the second leg once you’ve chosen the direction of the first. 
• Select Market or Limit Orders. When entering the order price, you can refer to the Funding Rate or Spread Rate next to the trading pair to gauge the arbitrage cost.
• Enter the Order Qty. You only need to fill one leg; the system will automatically fill the other leg. 
• Enable Smart Rebalance: Activating the portfolio rebalancing function helps to mitigate the risk of one leg being executed while the other remains unexecuted for an extended period. This function is optional but is enabled by default. 

 

 

 

Step 4: Click Both-Legs and Confirm your order. 

 

 

 

Step 5: View your active Arbitrage orders under Tools. Once the order is fully filled, navigate to Tools → History to check your order history. 

 

 

 

 

Step 6: After the order is placed, you are strongly encouraged to actively manage your position and assets. 

 

• To view your position, you can go to the Perpetual & Futures Trading page → Positions. 

 

 

• To view your Spot Assets, you can go to the Spot Trading page → Assets.

 

 

• To check funding fee/income details, you can view it from the UTA asset page Transaction Log. 

 

   

 

 

 

Frequently Asked Questions

 

When is it suitable to place Arbitrage orders?

You may leverage Arbitrage in the following scenarios: 

• When there is a spread between two trading pairs, Arbitrage enables you to lock down short-term spreads and minimize slippage caused by market fluctuations. 
• When dealing with large orders or when market conditions demand swift actions, trading both legs manages costs and mitigates potential risks arising from changing market conditions. 
• When executing a multi-leg strategy or closing multiple positions, Arbitrage facilitates precise trade execution for both legs, preventing missed opportunities or unclosed positions. 

How to calculate spread, spread rate, and est. APR for Funding Rate and Spread? 

• Spread = LTP of the Symbol Sold - LTP of the Symbol Bought
• Spread Rate = (LTP of the Symbol Sold - LTP of the Symbol Bought) / LTP of the Symbol Sold 
• Funding Rate APR = abs(Cumulative 3-Day Funding Rate) / 3 × 365 / 2
• Cumulative 3-Day Funding Rate = ∑ (Funding Rate of all intervals in the past 3 days)
• Spread APR = abs (Current Spread Rate) / Max. Period × 365 / 2 
• Max. Period = No. of days to expiration

 

Can I use Arbitrage to close positions?

Yes, opening and closing positions are allowed in Arbitrage. 

Do Subaccounts support Arbitrage? 

Yes, as long as the Subaccounts is a Unified Trading Account. 

Is Arbitrage available in Demo Trading?

Currently, the Arbitrage tool is not available in Demo Trading.   

What’s the liquidation risk for Arbitrage?

In cases where both legs are partially filled, liquidation risks may arise due to uneven risk exposure between both legs. We encourage you to activate Smart Rebalancing, a feature that regularly checks the number of filled orders for both legs and automatically places market orders to balance them to reduce risk exposure. 

In which Margin mode does Arbitrage work?

Arbitrage works in Cross Margin mode within Unified Trading Account. 

Why is my Arbitrage order unsuccessful?

Your order will not be successful if the available margin within your UTA is insufficient for both-leg orders. Please adjust your order quantity accordingly. 

What will happen if I disable Smart Rebalance?

Disabling Smart Rebalance means the system won't automatically adjust the number of orders for both legs. Instead, it assumes traders prefer to place orders for both legs at once after clicking the confirmation button. Your order will not be canceled until fully filled. 

Why is my Smart Rebalancing terminated even though my Arbitrage orders are not completely filled? 

Once Smart Rebalancing is enabled, if orders for both legs are not filled within 24 hours, the rebalancing strategy will be automatically terminated, and unfilled orders will be canceled. 

Where can I view my position or assets once my order is fully filled?

Once the order for both legs is fully filled, the rebalancing strategy is completed. You can go to the respective Order History page to view your Spot, Futures, or Perpetual orders. 

 

For Perpetual & Futures Positions, please tap Positions on the Derivatives Trading page. You may go to the Asset list on Spot Trading to view your Spot assets and check your Funding Income from the Transaction Log. 

Why is there an imbalance in both legs even after Smart Rebalancing has been activated?

This may be caused by 

1. Insufficient Maintenance Margin during the process of rebalancing.
2. Lack of liquidity in the market resulting in unfilled orders. 

If I cancel my orders on the Spot or Derivatives Trading page, will it affect my Arbitrage orders? 

There are two scenarios: 

• Smart Rebalancing Enabled: if the order for one leg is canceled, the unfilled order for the other leg will be automatically canceled, terminating the Arbitrage strategy. 
• Smart Rebalancing Disabled: Both legs operate independently. If unfilled orders for the first leg are canceled, the Arbitrage strategy will continue to run until the other leg is filled or canceled, marking the end of the Arbitrage strategy.