The transaction price of the two sub-shares of the graded fund is not only affected by its own net value, but also by the participants' emotions and expectations for the market outlook, which may make the transaction price and net value often inconsistent and the discount (overflow) rate fluctuate; In addition, because the steady share and the aggressive share cannot be purchased and redeemed separately, there is generally no fixed duration, and the discount (overflow) rate will exist for a long time.
Because the participants of prudent share and enterprising share are different, the transaction prices of prudent share and enterprising share are not completely changed, so the discount (overflow) rate may not match. When the sum of the two share prices is higher than the net value of the parent fund, we call it the overall premium; On the contrary, it is an overall discount.
Investors can buy two seed shares in the secondary market and merge them into parent fund shares, or they can buy parent fund shares directly on or off the market. Theoretically, the weighted price of the steady and enterprising share should be equal to the net value of the parent fund. If they are not equal, there will be opportunities for arbitrage, that is, to obtain the share of the parent fund in a cheap way, and then sell it in an expensive way to obtain risk-free income.
Take Yin Hua Shen 100 as an example. On July 29th, 20 10, the net value of the parent fund was 1.064 yuan, and the prices of Yin Hua's steady progress and sharp progress were 1.032 yuan and 1.248 yuan respectively, so the ratio was 1: 1. Theoretically, if you buy the shares of the parent fund on the 29th, and then sell two shares separately after splitting, you can get a risk-free income of 7.04%.
In fact, it takes 1 to 2 working days to purchase, redeem, split and merge, and the whole arbitrage operation takes 4 working days. During this period, the fluctuation of the sub-share price and the net value of the parent fund may make the discount premium observed at the beginning disappear, thus making the above arbitrage operation risky.
Discount merger arbitrage strategy
When there is an overall discount, the arbitrage process is as follows: "t- 1 observe the overall discount, buy two copies on t day and submit the merger application, t+ 1 confirm the merger application, obtain the parent fund on t+2 day and submit the redemption application, and the fund company will confirm the redemption application on t+3 day".
It should be noted that when buying a steady and enterprising share in proportion, it is actually equivalent to holding the share of the parent fund. Because the whole arbitrage process takes 3 working days, the fluctuation of the net value of the parent fund during this period may make the arbitrage income disappear. In this regard, stock index futures can be used to borrow or sell ETFs (Yin Hua Shen 100 Index, Shenwan Small and Medium-sized Board Index, Shenwan Shenzhen Component Index, Xincheng CSI 300 Index and other funds have corresponding ETFs as securities lending targets, while other graded funds have no corresponding ETFs) to hedge the risk of net value fluctuation of the parent fund.
Divide the "arbitrage" opportunity with the overall premium.
We put quotation marks on premium arbitrage because this operation is not actually risk-free arbitrage. When investors observe the overall premium at t- 1, it will be executed at T-0. The operation process is "T- 1 day, the fund company confirms that it has obtained the share of the parent fund on t+2 and submitted the split application, and it can sell two copies from t+3". It can be seen that if investors can open the market on t+3, then if the sub-stock price falls during the period, resulting in a decline in the overall premium rate, it may make the "arbitrage" space disappear and even lead to losses. The risks here include two levels: First, when the subscription application is submitted on T day, it will be confirmed by the net value of T day. For investors, t+ 1 to t+3 is equivalent to holding the share of the parent fund, so they face the risk of fluctuations in the net value of the parent fund. Although this kind of risk can be hedged in theory, most graded funds have no suitable hedging targets; Secondly, the fluctuation of the transaction price of sub-new shares leads to the fluctuation of the overall discount premium rate, which cannot be hedged.
Generally speaking, the overall premium "arbitrage" needs to be "predictable" and it is necessary to judge that there may be a large premium rate in the market outlook; Or when there is a small premium rate, wait for the premium rate to expand and get the "arbitrage" income. Therefore, the overall premium arbitrage is essentially a speculative behavior, in order to obtain the expectation that the overall premium rate will remain unchanged or expand. If "arbitrage" is carried out when the overall premium rate is high, there is a great risk that the overall premium rate will fall back, and there may be losses in implementing "arbitrage" at this time.
Exponential enhancement strategy
Although it is impossible to carry out risk-free arbitrage at the overall premium, for investors who need to invest in index funds, the following strategies can be adopted to improve the holding income: buy the parent fund and split it into two sub-shares for long-term holding. When the overall premium occurs, while selling two sub-shares, they can buy the same amount of parent fund off-site and split it into two sub-shares, so as to realize additional income while keeping their share unchanged.
As of August 20th, 1 4,1,there are 23 graded funds whose overall premium rate exceeds 1%, and there are 6 graded funds whose overall discount rate exceeds 1%, so there is room for arbitrage in theory. However, according to the above statement, this is not a risk-free "arbitrage" for products with overall premium. For products with overall discount, either trading is inactive or there is no good hedging tool, so there are not many good arbitrage opportunities. Investors are advised to be cautious in "arbitrage" transactions.