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Arbitrage Trading: Pros and Cons

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     Arbitrage trading has small risks and stable returns. For large funds, if unilateral heavy positions intervene, they will face higher holding costs and greater risks. On the contrary, if unilateral light positions intervene, although risks may be reduced, the opportunity cost is, Time cost is also higher. Therefore, it is difficult to obtain a relatively stable and ideal return for large funds unilaterally heavy warehouses, or unilaterally weak warehouses to intervene in the futures market as a whole.      However, if large funds intervene in the futures market with long and short two-way positions, that is, carrying out arbitrage transactions, that is, not only can they avoid the risks faced by unilateral positions but also may obtain relatively stable returns. Now, let's take a look at the advantage of doing an arbitrage trading. Advantages  of  Arbitrage Trading Lower volatility .       Since arbitrage trading obtain...
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The Derivative World of Trading

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Image by Sergei Tokmakov Terms.Law from Pixabay             Since the day the market has started, lots of institutional investors makes predictions and does arbitrage to ensure the institution they work on gain more than what they lost. It isn’t uncommon that some of these investors does predict how things will fold before it happened, and it isn’t uncommon as well that their predictions are accurate. Now, I'm going to talk about the types of derivatives trading and the types of market participants. There are 3 types of derivatives trading: hedging, forecasting, and arbitrage trading. Market participants participating in each type of trading are called hedgers, forecasters, and arbitrage traders. To help you understand, we will explain the futures trading among derivatives. Futures trading refers to entering into a contract to purchase goods needed at a specific time in the future at a price at present time, rather than directly purchasing the it...
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