How to do cross-species arbitrage?
Cross-variety arbitrage can only be accomplished by two products with obvious strong price difference correlation. These two products generally have a strong substitution or complementarity in use, and generally have a relatively fixed price difference.
Investors can find a reasonable spread range by analyzing the spread, and they can operate beyond the reasonable spread range. When the price difference is higher than the fluctuation range, do more products that should be low and short products that should be high; When the price difference is lower than the change range, short the products that should be low and do more products that should be high. When the spread is restored to a reasonable range and the position is closed at the same time, the income can be generated.
The above is the trading method of cross-species arbitrage. Commonly used cross-species arbitrage combinations mainly include: rebar, iron ore and coke; Soybean, soybean oil and soybean meal; Coking coal and coke; Soybean oil, palm oil and rapeseed oil; Strong wheat and corn; Hot rolled coils and bars.
The above is about cross-species arbitrage, and I hope it will help everyone.