Futures arbitrage can be divided into spread arbitrage and spot arbitrage. Spread arbitrage refers to arbitrage by using the spread between different contracts in the futures market. Spot arbitrage refers to a transaction that makes use of the unreasonable price difference between the futures market and the spot market to make a profit by conducting reverse transactions in the two markets until the price difference becomes reasonable.
There are essential differences between futures arbitrage and futures hedging, mainly in the following aspects:
0 1 has different uses.
The main purpose of arbitrage trading is to obtain relatively stable profits while taking less risks. The purpose of hedging is to transfer market risk, not profit. In many successful cases of hedging, future positions often loses money, but as long as the profit and loss of futures and spot markets are basically balanced, the purpose of hedging and risk locking is achieved.
The basis of the two is different.
Hedgers generally hold positions in the spot market, or expect to hold spot positions, so reverse future positions is established in the futures market to manage spot risks, that is, if there is no trading demand in the spot market, they will not hold future positions. On the other hand, arbitrage is different. Its long position, short position and spot position are all part of the arbitrage transaction, and the arbitrageur gains profits from the relative price difference of these positions.
The market scope involved is different.
Hedging only involves the spot and futures markets. In arbitrage trading, traders can carry out spot arbitrage in the futures and spot markets at the same time, or they can only carry out arbitrage in the futures market: or they can carry out intertemporal arbitrage between different delivery months of the same variety, cross-variety arbitrage between different varieties and the same delivery month, or cross-market arbitrage between different futures markets.
The basis of the two is different.
Hedging is based on the consistency of price changes in the futures market and the spot market. The more consistent the trend and range of changes, the better the hedging effect. Arbitrage traders use the unreasonable price difference between futures and spot, or between futures contracts to obtain arbitrage profits. The greater the unreasonable price difference, the greater the profit of arbitrage trading.
Hedging case
In March, the oil plant plans to buy 65,438+000 tons of soybeans two months later. At that time, the spot price was 2200 yuan per ton, and the futures price in May was 2300 yuan per ton. Worried about rising prices, the factory bought100t soybean futures. In May, the spot price really rose to 2400 yuan per ton, while the futures price was 2500 yuan per ton. The factory then bought the spot, with a loss of 0.02 million yuan per ton; At the same time, the futures were sold, and the profit per ton was 0.02 million yuan. The two markets break even, effectively locking in costs.
In March, the oil plant plans to buy 65,438+000 tons of soybeans two months later. At that time, the spot price was 2200 yuan per ton, and the futures price in May was 2300 yuan per ton. Worried about rising prices, the factory bought100t soybean futures. In May, the spot price really rose to 2400 yuan per ton, while the futures price was 2500 yuan per ton. The factory then bought the spot, with a loss of 0.02 million yuan per ton; At the same time, the futures were sold, and the profit per ton was 0.02 million yuan. The two markets break even, effectively locking in costs.
Arbitrage case
Corn starch is the downstream variety of corn. The price of corn starch can be expressed by a simple formula: corn starch price = corn price+processing cost.
When the price of corn starch >; When corn price+processing cost, there is arbitrage opportunity in profit.
Arbitrage between corn and corn starch;
On August 6th, 2017,65438, corn 180 1 contract closed at 1724, starch 20 19, and the price difference was 295 yuan/ton.
1 ton (1000kg) corn can produce 1340 kg (670kg) starch, and the ratio is 0.67.
1 ton corn deep processing fee 300 yuan. If the price of corn is 1700, then the price of starch should be higher than: 1700+300=2000 yuan/ton.
Conclusion: When the disk price of starch is overvalued, arbitrage opportunities appear. Namely: buy corn and throw starch.
After that, if the price difference between the two contracts narrows, the position will be closed for profit.
Corn starch is the downstream variety of corn. The price of corn starch can be expressed by a simple formula: corn starch price = corn price+processing cost.
When the price of corn starch >; When corn price+processing cost, there is arbitrage opportunity in profit.
Arbitrage between corn and corn starch;
On August 6th, 2017,65438, corn 180 1 contract closed at 1724, starch 20 19, and the price difference was 295 yuan/ton.
1 ton (1000kg) corn can produce 1340 kg (670kg) starch, and the ratio is 0.67.
1 ton corn deep processing fee 300 yuan. If the price of corn is 1700, then the price of starch should be higher than: 1700+300=2000 yuan/ton.
Conclusion: When the disk price of starch is overvalued, arbitrage opportunities appear. Namely: buy corn and throw starch.
After that, if the price difference between the two contracts narrows, the position will be closed for profit.