ETF funds generally refer to transactional open index funds, and investors can buy ETFs in two ways: they can buy from fund managers according to the net value of the fund on that day (like ordinary open mutual funds); It can also be purchased directly from other investors in the securities market. The purchase price is determined by the buyer and the seller, which is often different from the net value of the fund at that time (like ordinary closed-end funds).

Extended data:

Transactional open index funds are essentially index funds, but different from traditional index funds, transactional open index funds can be listed on exchanges, allowing investors to buy and sell a fund representing the "underlying index" like buying and selling stocks.

Transactional open-end index fund is a special open-end fund, which not only absorbs the advantages that closed-end funds can trade in real time on the same day, but also allows investors to buy and sell the shares of transactional open-end index funds in the secondary market like closed-end funds or stocks. It also has the advantage that open-end funds can purchase and redeem freely. Investors can buy or redeem the shares of transactional open-end index funds from fund management companies just like buying and selling open-end funds.

The subscription and redemption of transactional open-end index funds must exchange a basket of stocks (or a small amount of cash) for fund shares or a basket of stocks (or a small amount of cash) for fund shares. Due to the existence of this special physical purchase and redemption mechanism, investors can carry out arbitrage trading when there is a difference between the transaction price in the secondary market of transactional open index funds and the net value of fund shares. In addition, the market price of trading open-end index funds is basically the same as its unit net value, and there will be no common discount problem of closed-end funds.

Because ETF is traded in the secondary market, the transaction price will deviate from the net value of ETF due to the relationship between supply and demand. In addition, ETF collects management fees, pays transaction fees and distributes dividends, which will also cause some deviations between the two. When this deviation is large, investors can use the purchase and redemption mechanism to carry out arbitrage transactions.

For example, when the market transaction price of SSE 50ETF is higher than the net value of fund shares, investors can buy portfolio securities, use the portfolio securities to buy ETF fund shares, and then sell the fund shares in the secondary market to earn the difference after deducting transaction costs. On the contrary, when the market price of ETF is lower than the net value, investors can buy ETF, and then redeem it through the primary market in exchange for a basket of stocks, and then sell it in the A-share market to earn the difference.

Arbitrage mechanism provides investors with a new profit opportunity, but its biggest function is actually to eliminate the deviation between ETF transaction price and its net value through arbitrage purchase and redemption transactions, so that ETF transaction price is always consistent with the index.

It must be emphasized that arbitrage trading is not suitable for retail investors, because it requires operational skills and powerful technical tools, and arbitrage trading by one or two institutions eliminates arbitrage opportunities. The starting point for the subscription and redemption of SSE 50ETF after listing is 6.5438+0 million, which also determines that small and medium-sized retail investors cannot participate in arbitrage.

From the reasons of arbitrage opportunities, ETF arbitrage can be divided into many categories: arbitrage between primary and secondary markets, arbitrage between futures spot markets, arbitrage between different linked indexes and so on.

Arbitrage in the primary and secondary markets: the traditional ETF trading mechanism has two layers: first, investors can purchase and redeem ETF shares in the primary market at any time during trading hours; Secondly, in the secondary market, ETFs are listed on the exchange, and investors can buy and sell ETF shares at the market price.

When the secondary market price of ETF is higher than its fund share reference net value (IOPV) to a certain extent, investors can buy ETF shares at a relatively low price and sell them in the secondary market at a higher price to obtain arbitrage income; When the secondary market price of ETF is lower than IOPV by a certain margin, investors can operate in reverse. This arbitrage model requires investors to have a certain capital base, and it is impossible to operate with too little capital.

Arbitrage between futures spot markets: Arbitrage between futures spot markets is to profit from the deviation between index futures and ETF (representing a basket of stock spot). Such as arbitrage with the Shanghai and Shenzhen 300 index futures as the trading target. Some investors in the market will use the ETF with high synchronization and occasional deviation between the futures spot market and the Shanghai and Shenzhen 300 Index for arbitrage.

Arbitrage between different linked indexes: If investors judge that although the overall market direction is upward, the ETF prospect of linked industry A is better than that of linked industry B, then investors can get the difference between the two ETFs by selling the ETF of linked industry B and buying the ETF of linked industry A at the same time.

The other is the arbitrage between ETF and pegged index: some fund companies set up ETFs by representative replication, and reduce transaction costs by optimizing the replication index of some constituent stocks. The ETF that chooses to use the representative replication method does not completely replicate the component securities in the linked index, so there are sometimes unsynchronized change directions and ranges between ETF and linked index.

References:

Baidu Encyclopedia-Trading Open Index Fund