List of Arbitrage Articles

Reverse cash and carry arbitrage happens when the futures is at a discount to the spot price and is attractive even after you consider the cost of carry.

Arbitrage is about capitalizing on price differentials between markets while hedging is about reducing risk through offsetting positions.

Cash futures is quite simple. Reliance is trading at Rs.2100 in the cash market and at Rs.2118 in the 1-month futures. You buy Reliance in cash equivalent to the lot size and sell one lot of Reliance futures.

Terms like arbitrage and speculation are common place words in the market trading lexicon. As a trader in markets, it is essential to understand the arbitrage and speculation difference.

Arbitrage strategies are risk-free strategies to capitalize on price discrepancies. Here we look at different types of arbitrage trading strategies and the types of arbitrage strategies.

Reverse cash and carry arbitrage happens when the futures is at a discount to the spot price and is attractive even after you consider the cost of carry.

The arbitrageur in stock market is a very critical link between asset prices and helps to equalize them across markets or at least synchronize the prices.

In the media or news, there are always reports about one company being merged or bought by another rival company. Mergers and acquisitions are a fundamental part of a company’s business cycle.

To understand the importance of arbitrage, it is essential to understand the law of one price which governs the price discovery in efficient markets.

Before getting down to understanding the advantages of arbitrage, let us spend a moment understanding arbitrage at a conceptual level.

Arbitrage is about capitalizing on price differentials between markets while hedging is about reducing risk through offsetting positions.

Macro arbitrage is quite popular among arbitrage traders, especially higher risk players like hedge funds. Arbitrage trading is not just about cash-futures or exchange to exchange trading.

At a conceptual level, arbitrage is the anomalies in pricing. In the good old days of the NSE and BSE, there used be huge price differences between the two exchanges and even with the regional exchanges.

Cash futures is quite simple. Reliance is trading at Rs.2100 in the cash market and at Rs.2118 in the 1-month futures. You buy Reliance in cash equivalent to the lot size and sell one lot of Reliance futures.

Terms like arbitrage and speculation are common place words in the market trading lexicon. As a trader in markets, it is essential to understand the arbitrage and speculation difference.