LOF funds, also known as listed open-end funds, after the issuance of listed open-end funds, investors can purchase and redeem fund shares at designated outlets or buy and sell funds on exchanges.
In other words, LOF funds have two trading markets: the primary market and the secondary market. The primary market is that investors directly purchase and redeem a certain share from fund companies; The secondary market is for investors to buy and sell a stock like a stock.
When purchasing and redeeming from a fund company, it is a price called net value. When buying and selling in the secondary market, it is another price, called the current price.
There is only one net value of LOF fund every day (the fund company announces it at 3 pm every day); However, the current price of LOF funds changes in real time.
LOF fund arbitrage is to use the spread between the net value and the current price to buy in the low-priced market and sell in the high-priced market.
LOF fund arbitrage operation is divided into premium arbitrage and discount arbitrage:
Premium arbitrage (buying in the primary market and selling in the secondary market): when the current price of the fund in the secondary market is higher than the net value of the fund in the primary market and the range is higher than the handling fee, there will be premium arbitrage opportunities.
Discount arbitrage (buying in the secondary market and selling in the primary market): when the current price of funds in the secondary market is lower than the net value of funds in the primary market and the range is higher than the income, there will be discount arbitrage opportunities.
How does lof fund arbitrage? The preparations are as follows:
Apply for account
The purchase and redemption of the primary market is connected with the fund company, and it is necessary to open a fund account in the securities business hall first;
Redemption in the secondary market is carried out through stock accounts, and it is necessary to apply for a brokerage account.
After that, LOF funds that can carry out arbitrage operations are screened, focusing on volume and premium rate, giving priority to volume. The more turnover, the better. People like to buy, and it is easier for us to sell.
The greater the absolute value of premium rate/discount rate, the better, and greater than the handling fee is the basic requirement.
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