Arbitrage, also known as hedging profit, refers to the trading behavior that futures market participants use the price difference between different months, different markets and different commodities to buy and sell different kinds of futures contracts at the same time to obtain profits from them.
In the futures market, arbitrage can sometimes provide more reliable potential returns than simple long-term trading, especially when traders make in-depth research and effective use of the seasonal and cyclical trends of arbitrage, the effect is even greater.
Some people say that the risk of arbitrage trading is smaller than that of simple long-term trading, which is inaccurate. Although the inherent risk of arbitrage of some seasonal commodities is lower than that of some simple forward transactions, arbitrage is sometimes more risky than forward transactions. When the prices of two contracts and two commodities go in opposite directions, both arbitrage transactions lose money. At this time, arbitrage has become a risky transaction.
Therefore, as far as the whole futures trading is concerned, arbitrage trading is still a high-risk and high-yield speculation. The profit of arbitrage trading comes from one of the following three ways: (1) During the contract holding period, the profit of short positions is higher than the loss of long positions; (2) During the contract holding period, the profit of bulls is higher than the loss of bears; (3) Both contracts are profitable.
The loss of arbitrage trading comes from the opposite way: (1) During the contract holding period, the profit of short positions is less than the loss of long positions; (2) During the contract holding period, the profit of bulls is less than the loss of bears; (3) Both contracts are at a loss.
Let's give an example. On May 22nd, 2003, a trader arbitrage the soybean meal contract 1 1 in August and June, 2003, selling the contract in August at a price of 2092 yuan/ton and buying it at a price of 2008 yuan/ton. On May 29th, the contract price in August fell to 2059 yuan/ton, and the contract price in 165438+ 10 rose to 2029 yuan/ton. The arbitrator may issue a liquidation order to end the arbitrage transaction. As a result, traders made a profit on August contract 330 yuan and June contract 2 10 yuan. This example is a case where both contracts are profitable. Of course, the probability of this happening is relatively small.
(6), the method of futures arbitrage
There are three main forms of arbitrage in the futures market, namely, cross-delivery month arbitrage, cross-market arbitrage and cross-commodity arbitrage.
① Cross-delivery month arbitrage (cross-month arbitrage)
Speculators use the price difference of the same commodity in different delivery periods in the same market to buy futures contracts in one delivery month and sell similar futures contracts in another delivery month, thus making profits. Its essence is to profit from the relative change of the price difference of the same commodity futures contract in different delivery months. This is the most commonly used form of arbitrage. For example, if you notice that the price difference between May and July exceeds the normal delivery and storage costs, you should buy the soybean contract in May and sell the soybean contract in July. After that, when the July soybean contract is closer to the May soybean contract and the price difference between the two contracts narrows, you can make a profit from the change of the price difference. Cross-month arbitrage has nothing to do with the absolute price of goods, but only with the trend of price difference in different delivery periods.