Spot arbitrage refers to the behavior that when the price difference between the futures price and the spot price of a futures contract exceeds the normal level, traders take advantage of the change of the price difference to make profits by trading in the two markets in the opposite direction.
Basis generally refers to the difference between spot price and 1 month futures price, that is, basis = spot price-futures price. Theoretically, the basis should be equal to the holding cost of goods. Holding costs mainly include storage costs, transportation costs, quality inspection costs, increased invoicing costs, distribution costs, capital interest, etc. Once the basis deviates greatly from the holding cost, there will be opportunities for spot arbitrage. If the price difference between the PVC futures and the spot exceeds the normal holding cost, investors can buy the spot that meets the delivery standard of the exchange in the spot market, and sell the same number of futures contracts in the futures market, and then make the PVC spot into a standard warehouse receipt and sell it for delivery at maturity.
Second, the arbitrage cost analysis
Scheme 1 assumes that the enterprise sells 60 lots of PVC contracts of V0909 in the futures market at the market price of 7000 yuan/ton, accounting for 300 tons; At the same time, 300 tons of PVC in stock were purchased at the price of 6 100 yuan/ton. Suppose the holding period is 3 months and the spot location is in North China.
Theoretically, the current arbitrage cost of PVC = due delivery cost+capital cost.
1. Delivery cost due
Due delivery cost = storage fee+transportation fee+storage sampling inspection fee+handling fee, etc.
① Dalian Futures Exchange stipulates that the storage fee for PVC is 1.0 yuan/ton/day, and it will be put into storage one month before delivery. 1.0 yuan/ton× 60 days =60 yuan/ton.
② According to the calculation of vehicle transportation from North China to East China, the average transportation cost is 300 yuan/ton.
③ The incoming sampling inspection fee is 3,000 yuan/batch, and each batch is 300 tons, equivalent to 10 yuan/ton.
④ The handling fee includes the delivery fee of 2 yuan/ton and the transaction fee of 12 yuan/hand, which is equivalent to 2.4 yuan/ton.
⑤ The upper limit of storage fee is 25 yuan/ton according to the railway storage fee (including loading and unloading palletizing and railway paving).
⑥ VAT paid by the seller upon delivery: VAT paid per ton of PVC = (delivery settlement price-purchase price)/(1+17%) ×17% = 900/(1+17% )×/.
2. Cost of capital
Capital cost includes margin cost and spot capital cost.
Spot arbitrage cost of PVC
From the above calculation, it can be seen that the current arbitrage cost is about 703.9 yuan/ton when the spot is purchased in the main PVC producing area and then delivered to the delivery warehouse. If the spread between futures and spot is greater than the arbitrage cost, there is an arbitrage opportunity in the market and spot arbitrage can be carried out.
According to the price difference of 900 yuan/ton, there is arbitrage space of 196. 1 yuan/ton, and the total capital occupation is 7680.2 yuan per ton, which is 2.55% in rate of return on capital. The total arbitrage fund is about 2 million yuan, and the arbitrage profit can reach 5 1 1,000 yuan.
If we use our own spot and capital arbitrage to pledge the warehouse receipt to the bank or exchange after making the standard warehouse receipt to offset the futures deposit and reduce the capital occupation, we can ignore the capital cost. According to the price difference of 900 yuan/ton, there is an arbitrage space of 369.8 yuan/ton, and the total capital per ton takes up 6,630.2 yuan, accounting for 5.58% in rate of return on capital. The total arbitrage fund is about 2 million yuan, and the arbitrage profit can reach 1 1.6 million yuan.
Third, arbitrage strategy and timing.
1. Arbitrage strategy
According to the previous calculation and analysis, when the price difference between futures and spot exceeds the upper and lower limit of no arbitrage, there will be arbitrage opportunities in the market.
At present, the price difference between PVC0909 contract futures and spot is 600-900 yuan/ton, which exceeds the upper limit of no arbitrage. Investors can buy PVC spot registered warehouse receipts in warehouses designated by the exchange, and at the same time sell the same number of futures contracts in the futures market, holding one-time delivery at maturity to achieve arbitrage.
2. Arbitrage timing
In the futures market, due to the promotion of funds, the price difference often has an inertia, that is, a trend. When we seize the arbitrage opportunity, the spread will not necessarily return to equilibrium, and may continue to expand. Therefore, in practice, we should follow the trend and enter the market for arbitrage trading when the spread trend changes.
Fourthly, the risk management of spot arbitrage process.
1. Fund management
No matter arbitrage or hedging, we should always put capital management in the first place. Enterprises must first plan the funds needed for arbitrage. Don't arbitrage or use borrowed funds when the funds are insufficient to avoid unnecessary risks that may be brought to the enterprise, such as rising capital costs and insufficient margin.
2. Risk management
Although the risk of arbitrage trading is low, it is not completely risk-free. In the specific operation should pay attention to the following points:
① Enterprises should pay attention to the matching of spot quantity and quality with future positions in arbitrage operation.
② Dalian Commodity Exchange stipulates that the application registration date of PVC standard warehouse receipt shall not exceed 120 natural days (including 120 natural days) from the production date of PVC, and the enterprise shall ensure that the spot can meet the requirements of the application registration time of warehouse receipt.
(3) Enterprises should evaluate their own risk tolerance, and then design corresponding arbitrage schemes, so as to avoid getting into trouble because of special market fluctuations and make the risk exceed the tolerance of enterprises.
④ Enterprises should arrange special personnel to manage and monitor the arbitrage process, and establish a scientific and reasonable decision-making system and risk control system.
3. The difference between arbitrage and hedging
For spot production enterprises, enterprises can carry out arbitrage operations more conveniently. When the futures price is higher than the spot price and there is room for arbitrage, enterprises can use their own spot to sell futures contracts in the futures market for arbitrage.
Forward arbitrage is similar to selling and hedging operations carried out by enterprises to lock in product prices, but the actual operating objectives are different. Arbitrage is to gain extra profits, and hedging is to lock in the risk of future price fluctuations.
Arbitrage is strictly based on the existing inventory of the enterprise, that is, it must ensure that the two markets run in the opposite direction at the same time. Hedging can not only hedge the existing inventory, but also appropriately hedge the future products according to the production plan.
Verb (abbreviation of verb) conclusion
To sum up, due to speculation in the futures market, the spot price of futures often deviates. When the two deviate too much, spot arbitrage can be carried out.
Due to the immaturity of the market, PVC futures may have many arbitrage opportunities in the initial stage of listing. It is suggested that enterprises or large funds closely track the spot price difference and realize arbitrage when arbitrage opportunities appear in the market.
There are short-term arbitrage opportunities in the market, and the main factor affecting PVC prices in the short term is the cost increase driven by the rise in crude oil prices. In practice, we should combine the analysis and suggestions of professional institutions to choose the right time to enter the market.
Finally, although the risk of arbitrage trading is small, it does not mean that there is no risk. There is no risk-free arbitrage in the market, and investors should be cautious in operation.