Indexing investment is mainly to obtain the rate of return consistent with the trend of the target index by investing in the stock index components with strong representation and high liquidity in the established market.

Before the birth of stock index futures, the only way to implement indexed investment was to buy all the stocks in an index according to the weight ratio of the index, or to buy several baskets of stocks to approach the market index. However, this method of stock portfolio replication index often has high tracking error. In contrast, the emergence of stock index futures allows investors to create a so-called "comprehensive index fund", which builds a portfolio that is the same as or higher than the target market index by buying and selling stock index futures and fixed-income bonds, thus replacing the actual purchase of stocks and greatly reducing the high transaction costs and index tracking errors faced by traditional investment models.

Futures plus bond appreciation strategy

The value-added strategy of futures and bonds is a fund allocation strategy, also known as the value-added strategy of futures and cash. This strategy uses stock index futures to simulate the index. The margin of stock index futures occupies a small part of the funds, and the rest of the cash is invested in fixed-income products in order to achieve higher returns. This strategy is considered as a typical strategy of enhanced indexed investment. This combination first ensures that the index can be well tracked, and when the undervalued fixed-income varieties can be found, the excess returns can be obtained.

The ratio of futures positions to cash positions in the strategy of futures plus cash appreciation is generally 1: 9, which can also be adjusted up or down. Some index funds only adopt this strategy for some funds, while others still adopt the traditional index investment method.

Arbitrage strategy of futures spot exchange

Futures cash arbitrage strategy is an arbitrage operation strategy that uses futures to convert futures into cash when there is a certain price difference between futures and cash. The purpose of this strategy is to make the total rate of return not only copy the rate of return of the original index, but also adopt the low pricing rate of return of futures.

This strategy itself is passive. When there is underestimation, the key to implementing this strategy is to accurately define the underestimation level of futures prices and accurately calculate all the costs and benefits of each transaction.

Its basic operation mode is: copy the underlying index with stock portfolio. When the reverse price difference between the underlying index and stock index futures reaches a certain level, all the stock spot positions are closed, about 10% of the funds are converted into futures, and the remaining 90% of the funds can get fixed income. When the relative price of futures is overvalued and there is a positive spread, it will all be transferred back to the stock spot. In addition, when there is an arbitrage spread between futures in each month, you can also earn profits through intertemporal arbitrage.

The operational limitation of this strategy is the buying and selling of stock spot positions, and selling a large number of stock portfolios has an impact on the stock spot market, resulting in impact costs. The calculation of this cost is influenced by the size of the stock spot position, trading timing and other factors. See Zhang Yun Finance and Economics for more details. I hope I can help you.