Forward arbitrage means that the price ratio between futures and spot is higher than the upper limit of no-arbitrage range, and arbitrageurs can sell futures and buy spot with the same value at the same time. After the current spot price ratio falls back to the no-arbitrage range, they will close their positions at the same time to obtain arbitrage income. Reverse arbitrage means that when the price ratio between futures and spot is lower than the lower limit of the no-arbitrage interval, the arbitrageur can buy futures with the same value and sell spot with the same value at the same time. When the price ratio between futures and spot rises to the no-arbitrage interval, the futures and spot are closed at the same time to obtain arbitrage income. 5- 1 and 9- 1 refer to contracts, for example, 5 refers to May contracts.
Reverse arbitrage is the reverse operation of forward arbitrage, which, like forward arbitrage, includes five steps:
(1) At the initial stage of arbitrage, the securities are borrowed from innovative securities firms, specifically the CSI 300 constituent stocks, with the same term as the futures contract, and the longest borrowing period is no more than 6 months.
(2) At the current price, according to their respective weights, the merged CSI 300 constituent stocks are sold, and the proceeds can be invested in government bonds to obtain interest income.
(3) According to the current futures price, buy equal but unequal futures contracts.
(4) When the arbitrage ends or the futures expire, the government bond investment will be recovered, and funds will be obtained to buy the CSI 300 constituent stocks at the current price.
⑤ Repay the included CSI 300 constituent stocks.
When it comes to positive arbitrage and negative arbitrage, we must first know three types of arbitrage, namely intertemporal arbitrage, industry arbitrage and cross-market arbitrage. Among the three kinds of arbitrage, forward arbitrage and reverse arbitrage have their own meanings.
First of all, in intertemporal arbitrage
Positive set refers to recent buying and long-term selling. Reverse hedging refers to short-term selling and long-term buying.
Second, in industrial arbitrage.
Positive set refers to making more raw materials and shorting finished products. Countervailing means shorting raw materials and making more finished products.
Third, in cross-market arbitrage
Positive set refers to foreign long and domestic short. Reverse hedging refers to short selling abroad and long selling at home.