Cross-commodity arbitrage refers to arbitrage trading by using the price difference between two different but interrelated commodity futures contracts, that is, buying a futures contract of a commodity in a certain delivery month and selling another futures contract in the same delivery month at the same time, so as to hedge the two contracts and make profits at the same time at a favorable opportunity. In cross-commodity arbitrage trading, traders are concerned about the relationship between contract prices, not the absolute price level. They buy contracts they think are "cheap" and sell those that are "high-priced". If the price difference changes in the same direction as the forecast, traders can benefit from the mutual change of the prices of the two contracts. Therefore, the potential profit of arbitrage is not based on the rise or fall of commodity prices, but on the expansion or reduction of the spread between two arbitrage contracts. 1. The practice of technical conditions of cross-commodity arbitrage shows that if the selected futures contracts meet the following conditions, the probability of successful arbitrage will be greatly improved: (1) The historical spread of the two selected commodity futures contracts must have certain rules. In most cases, the price difference will fluctuate within a certain range, and it is rare for the price difference to break through its upper and lower edges. When the spread expands or shrinks to a certain extent, the subsequent spread fluctuation will change in the opposite direction. Judging from historical changes, it is a high probability event that the price difference fluctuates back and forth within a certain range. (2) The price fluctuation between two futures commodities must have certain correlation and linkage. This can be calculated and proved from the perspective of probability and statistics. Practical experience shows that the arbitrage effect of futures varieties with correlation coefficient between "0.7- 0.95" is better. If the correlation is too high, the risk is small, but the arbitrage space is too small and the yield is low; If the correlation is too low, the arbitrage space will increase significantly, the rate of return will increase significantly, but the risk will also increase greatly. (3) Futures contracts to be arbitraged shall have sufficient liquidity and capacity and be matched with each other for arbitrage. 2. Operating principles of cross-commodity arbitrage Generally speaking, cross-commodity arbitrage should follow the following basic principles: (1) The principle of correspondence between buying and selling directions. Establish selling positions at the same time as buying positions, not just buying or selling positions. (2) The principle of equal quantity of buying and selling. That is to say, while establishing the same number of selling positions, a certain number of buying positions should also be established, otherwise, the mismatch of long and short positions will expose positions (that is, net long or short positions) and face greater risks. (3) The principle of opening positions at the same time. Generally speaking, bulls and bears should be established at the same time. In view of the fluctuation of futures prices, trading opportunities are fleeting. If you can't open a position at the same time at a certain moment, the spread may become unfavorable to arbitrage, thus losing the arbitrage opportunity. (4) The principle of simultaneous hedging. When the arbitrage position reaches the expected profit target after a period of fluctuation, hedging is needed to settle the profit, and hedging operation is also needed. Because if hedging is not timely, it is likely to make long-term spread profits disappear instantly. (5) The principle of contract-related arbitrage is generally carried out between two contracts with strong correlation, and not all varieties (or contracts) can arbitrage. This is because, only when the contract has a strong correlation, the spread will return, that is, the spread will expand (or shrink) to a certain extent and then return to the original equilibrium level, thus having the basis of arbitrage; Otherwise, arbitrage on two unrelated contracts is tantamount to one-way speculation on two different contracts. 3. Risk control of cross-commodity arbitrage It should be pointed out that cross-commodity arbitrage is still a speculative behavior. As long as the arbitrage position is not completely hedged, there will be risks, which puts forward higher requirements for the correct handling of hedging. Therefore, in risk control, we should look at it from a changing and dynamic perspective, just like one-way speculation, and never look at it from a static and rigid perspective. Otherwise, the so-called arbitrage with less risk will also fail with greater losses: (1) Dynamic tracking of arbitrage positions. Once some investors open positions, they don't pay much attention to the profit and loss changes of positions, but just wait for the emergence of profit opportunities, which is not desirable. The dynamic tracking of arbitrage position is to check whether the market trend fluctuates according to the arbitrage operation after the arbitrage position is established, so as to find the signs early and reduce the losses. (2) There must be a concept of "stop loss". Arbitrage will also appear "in case" like one-way speculation. Once the spread changes beyond a certain range, it is necessary to timely review whether the arbitrage opportunity is mature and whether the arbitrage operation is reasonable, and correct it in time, instead of waiting for the spread to fluctuate in a good direction. Because most investors think that the risk of arbitrage is small, the funds used for arbitrage are often much larger than those used for one-way speculation, and many people almost use them up. At this point, it is not necessarily less risky than one-way speculation with only a small amount of money. If it can't be corrected in time when the arbitrage is unfavorable, it is very likely to cause great losses. Therefore, arbitrage should also set a stop loss plate. (3) Don't stick to the arbitrage principle. General arbitrage should follow the principle of corresponding quantity, opposite direction and consistent advance and retreat, but it should be used flexibly in practice. For example, in the process of arbitrage, once the loss tends to expand, it is necessary to change the quantity correspondence into quantity mismatch in time, and appropriately reduce the unfavorable position to increase the weight of the favorable position (that is, one party hedges more than the other), thus reducing the loss. For another example, if there is a very clear fluctuation direction in the arbitrage process, then it is necessary to delay the opening of positions. In other words, one of the hedges should be established in this direction first, and the other does not need to be established immediately, but delayed for a certain period of time in order to obtain a larger market spread. This is equivalent to winning the first place in the process of opening a position. Similarly, when there is a profit, we should hedge the unfavorable hedging first, and then hedge the favorable hedging to expand the profit. This is the wonderful use of delaying the opening of positions and delaying hedging. Sometimes the real profit often depends on the timing of delaying the operation. Of course, this should be built within the controllable range. (4) Converting arbitrage into one-way speculation According to price fluctuations, when the price is overbought to a certain extent, market forces will change this state. Similarly, when the market is oversold to a certain state, market forces will also change this state, which puts forward such a topic for arbitrageurs: seize the opportunity to change the market in time, correctly hedge one side, and turn arbitrage into one-way speculation, which is often possible to obtain one-way speculative profits several times that of normal arbitrage.