Arbitrage itself is a high-risk and high-return investment behavior, that is, using the price difference of different markets or different varieties of investment targets to make profits.

Cross-border commodity arbitrage is commodity arbitrage in the international market. But the so-called goods here are not iPhoneX or milk powder, but goods.

That's right! It is a commodity, not a "mass commodity", which is completely different from those consumer goods sold in supermarkets. Supermarkets don't sell crude oil, and commodity exchanges don't trade spicy strips.

Bulk commodities refer to homogeneous and tradable commodities that are widely used as industrial basic raw materials and can only be traded on legal commodity exchanges. Commodities can be roughly divided into three categories: energy commodities, metal commodities and agricultural products:

1, energy and chemical products: crude oil, fuel oil, unleaded gasoline, propane, natural rubber, etc.

2. Metal products: gold, silver, copper, aluminum, lead, zinc, nickel, palladium and platinum;

Agriculture (by-products): corn, soybean, wheat, rice, oats, barley, rye, pork breast, pigs, live cattle, calves, soybean powder, soybean oil, cocoa, coffee, cotton, wool, sugar, orange juice, rapeseed oil, eggs, etc.

Since we want to arbitrage goods, we must find the price difference of these goods in different exchanges, buy them here and sell them there. But there are so many commodities, such as crude oil and soybeans, that it is impossible to conduct physical transactions, so our transactions represent physical agreements. Just like the previous silver ticket, the transaction is not 100 silver, but silver ticket. And this agreement is a futures agreement, that is, commodity futures.

Commodity futures are standardized contracts based on specific commodities such as cotton, soybeans and oil. A standardized agreement for buyers and sellers to buy and sell a certain number of physical goods at an agreed price (such as 3,000 yuan/metric ton) on an agreed date in the future (such as 1 year contract, that is, March 20 19).

Commodity futures are standardized contracts based on specific commodities such as cotton, soybeans and oil. A standardized agreement for buyers and sellers to buy and sell a certain number of physical goods at an agreed price (such as 3,000 yuan/metric ton) on an agreed date in the future (such as 1 year contract, that is, March 20 19).

Arbitrage, where does it come from?

The rise and fall of commodity futures prices is essentially a game. After China restricted stock index futures trading, many hedge funds turned to commodity futures. The price of bulk commodities is the same as our daily necessities, and its fluctuation is determined by supply and demand. Internationally, the main factors affecting commodities are as follows:

And these are the sources of arbitrage. It is precisely because of these factors that there will be price fluctuations, which will create profit space.

How to arbitrage?

International commodity arbitrage is not as simple as everyone thinks. It is said that to speculate in A-shares, it is necessary to know astronomy and geography, but to play cross-border commodity arbitrage, you have to understand industry, trade and politics! Why do you say that? Look down.

We take the cross-border commodity arbitrage hedging strategy of Liaoning and Soviet assets with excellent performance as an example. The arbitrage logic of Liaosu assets can be mainly divided into three aspects: industrial chain profits, substitutes and complementary products. The operation difficulty and risk of these three strategies increase in turn.

Industrial chain profit

Simply put, it is to find opportunities to hedge strong related commodities, such as soybeans, soybean oil and soybean meal, in which soybeans are raw materials and soybean oil and soybean meal are products. This is a typical strongly related commodity. The price fluctuation of soybean will directly affect the prices of soybean oil and soybean meal.

However, the prices of soybean, soybean oil and soybean meal cannot change in the same proportion. For example, when the spread increases over a period of time, when the spread exceeds the normal range, then you can buy futures contracts at a low price and sell futures contracts at a high price. After the price difference falls back to the normal level, reverse operation is carried out, so as to achieve the purpose of strong arbitrage of related commodities.

substitute

For example, soybean oil and palm oil are typical substitutes. Palm oil, soybean oil and rapeseed oil are also called "the three major vegetable oils in the world". The typical feature of substitutes is that if the supply of commodity A is insufficient, it will immediately stimulate the demand of commodity B. At this time, if arbitrage is to be carried out, it is to buy commodity A futures and sell commodity B futures.

Supplementary goods

The arbitrage logic of complementary products is the same, but the influence of commodity prices is different. For example, people prefer to spend on holidays, so the demand for oil will increase greatly, so enterprises will desperately produce soybean oil to meet the market supply, and the remaining soybean meal after extracting soybean oil is likely to be overcapacity. Therefore, the prices of soybean oil and soybean meal in the market may change in the opposite direction. Obviously, there are fluctuations and profits, and the principle is the same. For example, when the price of soybean meal is too low, buy soybean meal futures and sell soybean oil futures; Then wait for the spread to narrow, and then reverse the operation.

Compared with the price fluctuation of a single futures contract, the price difference between different futures contracts will be much smaller, especially when the Black Swan event occurs, cross-commodity arbitrage can better hedge risks.

Many people equate arbitrage with speculation, which is actually biased. The same is for profit. Pure speculation will only aggravate the price fluctuation of investment products, while arbitrage can make abnormal market prices return to rationality, increase market liquidity and bring smoother and more stable returns to investors.