A 0.0107% eight-hour carry that must survive a 36.39% range and a -4.28% hour
Should the basis trader keep the spot-plus-equal-perpetual-short position at full size for the carry, or cut size so the short leg can absorb another hour like Saturday's -4.28% move?
The market facts are real; the decision maker is illustrative.
The week and the position
In the week of 29 November 2021, ETH fell 2.29% to close 4,196.44, inside the middle third of a 36.39% range (high 4,778.75 Wednesday, low 3,503.68 Saturday). Perpetual funding averaged 0.0107% per eight hours, with a minimum of 0.0066% and a maximum of 0.0192%. An illustrative basis trader holds spot ETH and an equal short in the perpetual, earning that funding. The largest one-hour move was -4.28%, and ETH gained 13.29% against BTC, though its hourly correlation with BTC was close at 0.85.
Judgment
The hedge cancels price direction, so the position's live risk is the short leg's margin during the week's fast hours. Funding never went negative and stayed in a narrow band, so the carry is real but small against 87.1% annualised realised volatility. Keep the trade, but size it so the short leg can hold through a repeat of Saturday's -4.28% hour, and treat the carry as thin, stable income rather than a reason to lever up. The ETH/BTC outperformance gives no offset, since both legs are in ETH.
What would change it
If funding holds above its 0.0192% weekly maximum for several eight-hour periods, size can be increased within the same margin limit. If funding prints below its 0.0066% minimum or turns negative, the carry no longer pays and the position should be closed.
What sets this case apart
The decision is not about ETH direction; it is whether thin but stable funding justifies a size the short leg's margin can carry through fast hours.