A basis trade with no funding history meets a 7.38% hour on its short leg
Should the trader open the spot-long, perpetual-short basis position at full size, or defer until funding rates are observed and the short leg is sized for another hour like Sunday's?
The market facts are real; the decision maker is illustrative.
The week and the position
In the week of 12 March 2018, BTC fell 14.09%, from 9,533.57 to 8,189.99, inside a 35.06% range that ran from a Monday high of 9,888.88 to a Sunday low of 7,322.00. Realised volatility was 135.3% annualised and the largest one-hour move, 7.38%, struck late in the UTC day on Sunday. Funding rates are unavailable and only four weeks of history exist, two down and two up. ETH fell 11.43 percentage points more than BTC, with hourly correlation at 0.89. An illustrative basis trader wants to earn funding on a hedged pair.
Judgment
The position earns only if funding is paid, and this week provides no funding data and four weeks of history, so the carry cannot be sized. The hedge is not costless: the short leg must carry a 35.06% range and absorb a 7.38% hour on its margin alone. Defer the position, and if opened, size it from the worst hourly move rather than the weekly average, with cash held to meet the short's margin call independently.
What would change it
If observed funding rates over several weeks show a positive average of similar magnitude to the short leg's margin cost per week, the position can be opened at the margin-implied size. If a single venue requires the spot leg as collateral, the deferral holds.
What sets this case apart
The case removes the carry number that normally justifies the trade, leaving only the margin survival of the unhedgeable short leg.