Butterfly arbitrage is hedging profit by using the price difference of different delivery months, which consists of two opposite intertemporal arbitrage and * * * enjoying the contract in the middle delivery month. It is an option strategy with limited risks and returns, and it is a combination of bull market spread and bear market arbitrage.

It is a synthetic form of arbitrage trading, and the whole arbitrage involves three contracts. As the name implies, butterfly arbitrage is like a butterfly, with wings symmetrical to both sides of the body. Three kinds of contracts in futures arbitrage are near-month contracts, forward contracts and more forward contracts, which we call near-end contracts, mid-end contracts and far-end contracts.

Extended data

Butterfly arbitrage characteristics

1. Butterfly arbitrage is essentially the arbitrage of the same commodity across delivery months;

2. Butterfly arbitrage consists of two intertemporal arbitrages with opposite directions;

3. The bond between two intertemporal arbitrage is the futures contract in the middle month, and the quantity is the sum of the two ends;

4. Butterfly arbitrage must make three orders simultaneously.

5. Compared with ordinary intertemporal arbitrage, butterfly arbitrage is theoretically less risky and profitable. (Forward intertemporal arbitrage can be risk-free)

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