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.
To understand the importance of arbitrage, it is essential to understand the law of one price which governs the price discovery in efficient markets.
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.
Cash and carry arbitrage is a financial arbitrage strategy that involves making the best of the anomalies in pricing, or mispricing as it is called.
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.
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