Reverse arbitrage means selling recent contracts and buying forward contracts. This is mainly for arbitrage. When the price difference between two contracts fluctuates abnormally, it will encounter reverse arbitrage.
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) Selling the Shanghai and Shenzhen 300 constituent stocks at the current price according to their respective weights, and the proceeds can be invested in government bonds to obtain interest income.
(three) according to the current futures price to buy the equivalent but not equivalent futures contracts.
(4) When the arbitrage ends or the futures expire, investors, such as recovering the national debt, obtain funds and buy the CSI 300 constituent stocks at the current price.
⑤ Repay the included CSI 300 constituent stocks.
Futures arbitrage
Futures arbitrage refers to the trading behavior of using the price difference between related markets or related contracts to conduct reverse trading in order to profit from the favorable change of price difference.
If the spread between the futures market and the spot market is used for arbitrage, it is called spot arbitrage. If the spread between different contracts in the futures market is used for arbitrage, it is called spread trading.
The technology of arbitrage in futures market is very different from that of market makers or ordinary investors. Arbitrators use the price difference of the same commodity between two or more contracts, not the price of any contract. Therefore, their potential profits are not based on the rise or fall of commodity prices, but on the expansion or contraction of the price difference between different contract months, thus forming their arbitrage trading positions. It is precisely because the profit of arbitrage trading does not depend on the unilateral rise or fall of price, so in the futures market, this kind of risk is relatively small and controllable, and the income is relatively stable and rich, which is favored by large households and institutional investors.