1. The risk that a delivery month is forced to lighten up due to unilateral quotation in the process of arbitrage trading.
The basic principle of arbitrage trading is that traders simultaneously carry out the same amount of reverse trading, and at the same time close positions and open positions. However, according to the risk control and management measures of stock index futures, when there is a continuous unilateral market in a delivery month, the trading ownership will force the contract to lighten its position. Since the closing time of stock index futures is 15 minutes later than that of the stock market, if the stock index futures market starts the compulsory lightening measures of the exchange after the stock market closes, the arbitrage positions held in the stock index futures market may be forcibly lightened by the exchange because the exchange does not give preferential treatment to arbitrage positions. If hedgers or spot arbitrageurs are forced to lighten their positions in the future, it will lead to the risk exposure of stock spot positions.
2. The risk of forced liquidation caused by untimely margin increase.
Arbitrage trading needs to be carried out simultaneously in the spot market, different delivery months in the same market, related trading products in the same market or different trading markets of the same product. Because the domestic stock index futures trading rules do not give arbitrage trading preferential treatment in terms of handling fee and margin, the cost of arbitrage trading in terms of trading margin and handling fee is twice as high as that of pure speculation. At this time, if the stock index futures market fluctuates greatly, whether the exchange raises the margin level or the arbitrage trader makes up for the floating loss, it needs to add a lot of margin. At this time, the pressure of arbitrage traders to pursue margin is obviously greater than that of pure speculative trading. If the arbitrage trader fails to add the margin in time, the transaction will face the risk of being forced to close the position within one delivery month. Once a contract is forcibly closed, another futures contract becomes a one-way speculative transaction, and the arbitrage trader will bear the corresponding speculative risks.
Third, there may be a large impact cost in the process of arbitrage trading, which may offset arbitrage profits and even lead to arbitrage losses.
Intertemporal arbitrage traders need to trade in the same amount in two different delivery months in the same market at the same time. Judging from the actual operation of foreign stock index futures, stock index futures are often concentrated in a certain delivery month, and the transactions in other delivery months are often very light. When the liquidity of stock index futures in individual delivery months is insufficient, if the transaction may not be completed in time or the transaction price is far from one's expectation, this situation may increase the arbitrage cost, affect the arbitrage profit and even lead to arbitrage losses.
Four, spot arbitrage, because the spot stock portfolio is inconsistent with the index stock portfolio, there may be simulation errors.
In the stock index futures market, spot arbitrage is a main form of arbitrage. Accurate spot arbitrage requires buying and selling stock index futures contracts and corresponding stock portfolios in the spot market. However, in the actual operation process, it is difficult to achieve accurate correspondence between the two.
The main reasons for the error between them are as follows:
First, there are too many constituent stocks that make up the index. To simulate this index, it is necessary to complete the trading of multiple stocks in a short time, which is very difficult in practical operation.
Second, even though there are not many constituent stocks in the index, because the index is constructed according to the market value ratio, the minimum unit of actual stock trading is 100 shares, which leads to the difference between the spot stock portfolio index and the stock portfolio of the index.
Third, individual constituent stocks in individual periods in the index cannot be bought or sold because of their ups and downs, which affects the consistency of spot stock portfolio and index stock portfolio.
There may be some differences between spot stock portfolio and index stock portfolio, which will inevitably lead to the inconsistency of their future trends or returns, which may lead to simulation errors in spot arbitrage.
Verb (abbreviation of verb) may lead to transaction losses caused by programmed transactions.
Unlike one-month speculative trading, arbitrage traders should make use of the price difference between two delivery months to earn profits. Theoretically speaking, only when the stock index price in one delivery month is higher or lower than the normal spread level in two months can intertemporal arbitrage make a profit. However, due to the large number of arbitrage traders in the stock index futures market, this arbitrage opportunity is fleeting, and institutional investors often use computer programs to carry out intertemporal arbitrage.
Although programmed trading has the advantage of objectivity, it also has certain risks in operation. First of all, the parameters of programmed trading are calculated on the basis of past trading data, and the past trading situation cannot represent the future trend of stock index futures market; Secondly, programmed trading is based on the principle of high probability events. If there is a small probability event, adopting programmed trading in arbitrage trading may bring bilateral losses to traders.
In addition, according to the current trading rules, spot reverse arbitrage may lead to an increase in the cost of securities lending and arbitrage trading.