Cross-exchange spread: entry, exit, real result
The cross-exchange spread is the price difference of the same asset on two venues. You can earn on it by opening positions when the spread is wide and closing them when it narrows. But the “nice number” in a table and the real result often differ several times over — here is why.
The basic formula
For an asset priced A on one exchange and B on another:
If B is more expensive than A, the scheme is: buy (long) on A and sell (short) on B. When the prices converge, both positions are closed and the difference remains as profit. For futures these are two opposite positions of equal size; for a spot–futures pair it is buying the coin and shorting the contract.
Entry and exit spreads use different prices
Every exchange has a buy price (ask) and a sell price (bid). You do not buy or sell at the “price” from a ticker: you buy at the ask and sell at the bid. So:
- Entry spread = (bid on the exchange where you sell − ask on the exchange where you buy) / buy ask.
- Exit spread = (ask on the exchange where you close the short − bid on the exchange where you close the long) / sell bid. It is usually smaller than the entry one, and the smaller the better for you.
- Result before fees = entry spread − exit spread.
An example with illustrative prices
| Moment | Exchange A (long) | Exchange B (short) | What happens |
|---|---|---|---|
| Entry | ask 100.00 | bid 100.60 | buy on A, sell on B: spread 0.60% |
| Exit | bid 100.20 | ask 100.30 | sell on A, buy back on B: +0.20 and +0.30 per unit |
| Total 0.50% before fees. If four trades cost 4 × 0.05% = 0.20%, about 0.30% remains. | |||
Why the “nice” spread in a table is misleading
- Order-book depth. A ticker price is the top of the book for a small size. For your amount the execution price is worse. That is why the “real order-book spread” is calculated by depth for a given amount: it shows what it costs to enter and exit with your size.
- Fees. Four trades: opening and closing two legs. Taker fees on narrow spreads eat the whole profit.
- Funding. While the position is open, futures pay funding; it can help or eat the spread. See funding arbitrage.
- Different contracts. Tickers with the same name can be different assets or have a different multiplier (1000PEPE and PEPE). Check the specification before trading.
- Liquidation price. The spread can widen against you, and one leg can take a loss before prices converge. Different leverage and margin on two exchanges create a liquidation risk — see arbitrage risks.
- The spread may never converge. The reason for a wide spread can be structural: the coin is being delisted, deposits and withdrawals are closed on an exchange, the network fee is high.
Why exit differs from entry
You choose the entry yourself — you open when the spread is wide. The exit is decided by the market: the spread collapses, stays as it is or widens. That is why not only the current value matters on the chart, but also the pair’s spread history — how often it reached the needed level and how fast it collapsed. The exit line on the chart shows the level at which the pair closes with the result you need.
A checklist before entering
- Calculate the result from the order book for your size, not from the ticker.
- Count the fees of four trades and the expected funding for the holding time.
- Check that both contracts are the same asset with the same multiplier.
- Check depth on both sides, including at exit.
- Make sure both exchanges have enough free margin with a reserve for price moves.
How SpreadScope shows it
The pair table shows the price spread, the funding spread, fees and the “real order-book spread”; the pair card shows both exchanges’ order books, and the chart shows the spread history with an order book for the amount you need and an exit line. Compare jumps on the chart with real volumes, not with a single candle.