First of all, we should understand the principle of arbitrage: the price of ETF in the secondary market is determined by its net value, but it is affected by the relationship between supply and demand in the secondary market, which makes the price deviate from the net value. When this deviation exceeds the arbitrage cost, the arbitrage opportunity appears. By arbitrage, we mean cross-market arbitrage between the primary market and the secondary market of ETF.
There are four forms of general ETF arbitrage:
1, instantaneous arbitrage (ETF market price deviates from the net value in a sufficient moment);
2. Delayed arbitrage (correctly predicting the market trend of the day);
3. Cross-day arbitrage (correctly predicting the market trend in the later period);
4. Event arbitrage (ETF arbitrage caused by stock suspension or down limit or down limit due to unexpected events).
The arbitrage that really has the universal significance and unique advantages of ETF and is feasible is delayed arbitrage. Here, we take it as an example. Take the trend of SZSE100 ETF15901on April 5, 2002 as an example. If you can accurately predict that the Shenzhen Stock Exchange 100ETF will soar that day, then you can buy several times the share of Shenzhen Stock Exchange 100 ETF in early trading and sell the share of ETF in the secondary market in late trading to make a profit. Because the ETF trading rules stipulate that the ETF shares purchased on the same day cannot be redeemed, but they can be sold in the secondary market. If the ETF mechanism is not introduced, the stocks bought on the same day cannot be sold on the same day for profit taking.
Therefore, this kind of delayed arbitrage fully illustrates the characteristics of ETF arbitrage mechanism:
1, due to the emergence of ETF, T+0 trading in the stock market is possible;
2.ETF arbitrage is based on the correct judgment of the market, not 100% profit. If the deep ETF 100 drops sharply that day, the arbitrage transaction will end in failure.
3.ETF arbitrage transactions have arbitrage costs, mainly including: transaction costs (handling fees and stamp duty), impact costs and waiting costs. Especially for the constituent stocks with poor liquidity, the impact cost and waiting cost are higher.