> There's a large arbitrage opportunity right now. Futures are going for about $1,000 more than BTC itself right now and you can make risk-free* (assuming you know how to securely store your private key) profit. Doing so requires selling a future.

Not really. You have to post margin against your short position, which is costly and could rapidly lead to a margin call where you are forced to close your short position at the worst possible time (futures price surges, you are closed out in the futures but still long the cash Bitcoin, and then the spot price crashes before you can sell your cash position). Furthermore, there is a non-trivial cost of carry - properly securing your Bitcoin private key involves a costly cyber security infrastructure and operation. Then there is the massive counter party credit risk that you take on when facing the cash Bitcoin exchange (eg Mt. Gox). Finally, there are the unknown unknowns ... this is the first week of trading for a brand new type of futures contract created on the back of a bleeding edge technology bubble, things could go wrong in all kinds of unforeseen ways. So I would submit that a $1000 cash vs. futures spread is in fact not some huge arbitrage opportunity (or, in other words, there is no free lunch here in front of this steamroller).

Usually there isn't any risk in this scenario but thanks to cboe rules that cap volatility at 20%, there is quite a bit of risk hidden here. Say, you buy btc and short the future. If btc drops by 30% in a day, future trading will be halted at 20% which means that you can lose money if it is an expiry day. Also, CBOE and your btc exchange aren't linked. So you will have to put up additional margin when btc goes up and your future is losing money.

Expiry day is going to be very interesting then. I had no idea their volatility rules would apply to expiring contracts too, that's insane. Why would anyone want to trade that instrument?

This is how all future contracts work. There are daily limits that lock the contracts from trading. Interestingly enough these contracts seem to have very high margin requirements and lock limits. I also find the discussion about "shorting" to be interesting. All futures contracts have 2 position - a long and a short. The number of "shorts" is identical to the number of longs, unless I am misinterpreting the was these contracts are set up.

I wish I know :). Its not really a derivative if volatility is capped while the underlying is free to move around.

Just some kind of capped option.

trading is halted for _minutes_ 2min then 5min... hardly an earth shattering pause.