Spot arbitrage refers to a futures contract. When there is a price difference between the futures market and the spot market, it uses the price difference between the two markets to make a profit by buying low and selling high. Theoretically, the futures price is the future price of commodities, and the spot price is the current price of commodities. According to the same price theory in economics, the gap between them.

That is, "basis" (basis = spot price-futures price) should be equal to the holding cost of goods. Once the basis significantly deviates from the cost of holding, there will be opportunities for spot arbitrage.

The futures price is higher than the spot price, which exceeds all kinds of delivery costs, such as transportation cost, quality inspection cost, storage cost, increased billing cost and so on. Spot arbitrage mainly includes forward buying spot arbitrage and reverse buying spot arbitrage.

Extended data:

Spot arbitrage trading not only faces risks, but sometimes even has great risks. The main risks include:

(1) Tracking error risk of spot portfolio;

(2) The establishment and liquidation of spot positions and future positions face liquidity risks;

(3) the risk of additional margin;

(4) Whether dividend uncertainty risk and stock index futures pricing model are effective.

Faced with these risks, if the arbitrage rate of return after considering risks is higher than other investment trading opportunities, spot arbitrage activities may occur. Therefore, the risks faced by arbitrage and the expected rate of return will affect the efficiency of arbitrage activities and the degree of deviation between futures and spot spreads.

Baidu encyclopedia-cash arbitrage