BitMEX Alpha: Trading Opportunities for the RBN and AEVO Convergence

BitMEX

Note: Anything expressed below is not considered financial advice – they are only suggestions for users to learn more about trading strategies. Users are always encouraged to do as much research as possible before executing any trades. The content below is not intended to express any guaranteed return, and BitMEX does not take responsibility should your trades not perform as expected.  

Making a profit in crypto, especially derivatives, isn’t always straightforward. So we kickstarted “BitMEX Alpha” – a series to share our trading secrets on potentially profitable opportunities on BitMEX.

Bitcoin has retraced some of its gains after reaching all-time highs and consolidating around the 66,000 level, while funding rates have calmed down. Therefore, this week at BitMEX Alpha we will shift our focus to trading opportunities on RBNUSDT and AEVOUSDT.

The RBN and AEVO Convergence Opportunity

RBN (Ribbon Finance) is the governance token of Ribbon Finance, which is one of the first and largest DOV protocols offering various structured products developed over two years ago. AEVO (Aevo) is the governance token of Aevo, which is a CLOB decentralised exchange focused on both options and perpetual trading, built by the same team as Ribbon Finance.

Since launching AEVO in March, the token has made decent gains and posted an all-time high of 3.8572 last week (as traded on our AEVOUSDT contract). 

As voted by the Ribbon Finance community (see here), the RBN token will be convertible to AEVO 1:1, starting 15 May 2024 (see here), which means the price of RBN and AEVO should converge towards the day when conversion is available. Where is RBN trading now? It is currently trading at around 1.6 (as traded on our RBNUSDT contract at the time of writing).

What’s on the Table?

RBN and AEVO will eventually become convertible 1:1, here are the prices they are trading at at the point of writing.

Contract

Price

Funding Rate

RBNUSDT

1.6922

0.01%

AEVOUSDT

3.1451

0.01%

How to Execute the Opportunity?

Scenario

Steps

Expect RBN to trade higher to meet AEVO’s price (BitMEX Alpha’s view)
  • Long RBNUSDT
  • Hold the position until May 2024 or wherever PnL is satisfactory

Expect AEVO to trade lower to meet RBN’s price
  • Short AEVOUSDT
  • Hold the position until May 2024 or wherever PnL is satisfactory

Expect RBN / AEVO prices to trade somewhere between the current market prices
  • Long RBNUSDT and Short AEVOUSDT
  • You should long and short the same number of contracts for each pair (since the contract value is 1 RBN and 1 AEVO respectively, you can simply enter the notional amounts you want to buy and sell)
  • Utilise cross margin for both legs to be more capital-efficient
  • Hold the position until May 2024 or wherever PnL is satisfactory

What’s the Profit Potential?

The PnL potential is uncertain as it depends on the market price of RBN and AEVO when the conversion is enabled. For strategies that include short AEVOUSDT / RBNUSDT, remember that you will also earn funding payments (at 0.01% every 8 hours per current funding rate).

What Do I Need to Consider?

  • Exit and entry costs on both trades (e.g. trading fees and slippage).
  • Potential losses as this trading opportunity is not hedged, you could result in a negative PnL should the outcome of the prices of either token not go according to your strategy.
  • Liquidation risk considering you can trade up to 10x for both RBNUSDT and AEVOUSDT.