Four Modes Of Arbitrage Trading

　　 First, stock index futures arbitrage.

The arbitrage of stock index futures refers to the use of unreasonable prices in the stock index futures market and participation in stock index futures. shares Trading in the spot market, or at the same time, different periods and different (similar) stock index contract transactions, in order to earn the difference. The arbitrage of stock index futures consists of current arbitrage, intertemporal arbitrage, cross market arbitrage and cross variety arbitrage.

　　 Second, commodities futures Interest arbitrage

Similar to stock index futures, commodity futures also have arbitrage strategy. When buying or selling a futures contract, they sell or buy another related contract, and at the same time, they place two contracts simultaneously. In the form of transaction, it is somewhat similar to hedging, but hedging is to buy (or sell) real goods in the spot market and sell (or buy) futures contracts in the futures market, while arbitrage only buys and sells contracts in the futures market and does not involve spot transactions. Commodity futures arbitrage mainly includes current arbitrage, intertemporal arbitrage, cross market arbitrage and cross species arbitrage 4 kinds.

　　 Third, statistical arbitrage

Unlike arbitrage arbitrage, statistical arbitrage is a kind of risk arbitrage, which is arbitraged by historical statistical rules of securities prices. The risk lies in whether the historical statistical law will continue to exist in a certain period of time. The main idea of statistical hedging is to identify the best investment pairs (stock or futures), and then find out the long-term equilibrium relationship (cointegration) of each pair of investment varieties. When a certain variety's price difference (cointegration equation residuals) deviates to a certain level, it will start to build a warehouse, buy a relatively undervalued variety, sell short and relatively overvalued varieties, and wait until the price difference is regressive. The main contents of statistical hedging include stock pair trading, stock index arbitrage, margin hedging and foreign arbitrage trading.

　 Fourth, option arbitrage

　　 option (Option) also called option is a derivative financial instrument generated on the basis of futures. In essence, options are the pricing of rights and obligations separately in the financial field, enabling the transferee of rights to exercise their rights in the prescribed time for trading, and the obligor must perform. In the transaction of options, the party who purchases the option is called the buyer, while the seller of the option is called the seller, the buyer is the assignee of the right, and the seller is obliged to perform the exercise of the rights of the buyer. The advantage of options is that the risk of loss is limited while the profit is unlimited. Therefore, in many cases, the use of options to replace futures for short and arbitrage transactions will have smaller risks and higher yields than using futures arbitrage only.