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Questions tagged [arbitrage]

Arbitrage is the simultaneous purchase and sale of an asset to profit from a difference in the price. It is a trade that profits by exploiting the price differences of identical or similar financial instruments on different markets or in different forms. Arbitrage exists as a result of market inefficiencies and would therefore not exist if all markets were perfectly efficient.

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ETF and Underlying Index Arbitrage

if an ETF has a slight tracking error with regards to the index it is tracking, shouldn't that be easy to arbitrage? What Arbitrage strategy could be used, and why isn't the tracking error already ...
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Understanding Arbitrage Strategy (problems and solutions)

I think it's easier to understand with an example: Suppose this arbitrage between 3 markets: BTC/USD = $1000 USD // just to make easier the number BTC/EUR = $870 EUR EUR/USD = 1.17 USD We buy 1 ...
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Arbitrage on Libor rate and Swap rate

I must be wrong here, but still want to know where I am wrong. I found the data of Libor rate and swap rate from this link: http://www.interestrateswapstoday.com/libor-rates.html At the time, I read ...
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Calculation of spread arbitrage profit

I would like to know if my spread (arbitrage) calculation is correct or wrong. as an example i have bitcoins which i would like to use for the ethereum i am going to buy at market A and sell at market ...
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For someone who already has enough cash to buy a home, isn't it better to wait and take mortgage when interest rates are high?

Contrary to common wisdom in media the reasons why I think that taking mortgage at higher interest rates may make more sense are that: Almost all mortgages are callable by borrower. Hence, if you ...
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How should I pay tax on arbitrage profits?

Suppose I make an instant gain on an arbitrage trade. This is instant profit, so to speak, so technically there is no capital gains made. Do I pay CGT or income tax on the profit? I'm inclined to ...
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How do Authorized Participants prevent index fund tracking error, including tracking error due to an expense ratio?

When I search for explanations of how index-tracking ETFs avoid tracking error, the following explanation is normally given: ETFs allow certain Authorized Participants to trade the underlying assets ...
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How to execute orders for triangular arbitrage?

As a study, I've developed a simple algorithm to detect market discrepancies for triangular arbitrage opportunities through the OANDA REST API. To my surprise, it actually discovered a few of said ...
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Interest Rate Arbitrage - Pay off loan

I am planning for interest rate arbitrage to pay off my education loan in India at 11.25% interest rate using a personal loan at 3.9% interest rate from an European country where I work drawing ...
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What are the common arbitrage strategies for trading Gold?

As the title states, will like to know more about what arbitrage strategies are commonly used for gold traders.
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How does the S&P500 option chain relate to the S&P ETF options?

The S&P 500 itself seems straightforward enough: It's what you would get if you bought a little bit of the largest companies on the market. I understand that there are also options on the index, ...
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Is credit card arbitrage still viable?

Are the common credit card arbitrage schemes still viable? (investing during the grace period or during a zero percentage balance transfer period) Haven't the credit card companies figured this out ...
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Taxation of foreign currency arbitrage

I live near the border with Mexico have found a way to make some money trading currencies when I go over for the afternoon. Basically, I can withdraw money in pesos at an atm machine from a checking ...
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Question about option chain

https://beta.finance.yahoo.com/quote/GOOG/options?ltr=1&date=1516320000 OK, can't I just SELL "350 @ $395 and BUY "340" @ $391 and pocket $4 immediately and realize another $10 if and when the ...
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What is the difference between issuing company and holding company in a convertible bond

I am researching convertible bonds in Canada. While looking at the index etf that tracks convertible bonds, CVD What I don't understand is how come the list of Top 10 issuers is different from teh ...
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Dividend arbitrage using in the money puts

I was looking at dividend arbitrage It seems all I need to do is find stocks with a nice dividend(e.g KO). Then find an in the money put where the time premium is less than the dividend to be paid. ...
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Do I just let an options conversion/reversal trade go to expiration?

Let us say I lock in a small riskless profit using a conversion. Which means (as an example), I sell a call, buy a put and buy stock, and net a credit of .20. What do I do next? Do I just let the ...
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What do mutual funds gain by being different from ETFs

This is what I understand on how ETS work vis-a-vis mutual funds: If I buy an ETF (SPY), then the ETF trust fund does not take my money and go out and buy the underlying stocks. I buy one share of SPY ...
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Can we use ETF instead of individual stocks to perform an index arbitrage

In Index arbitrage, people usually buy(sell) a future against the basket of stocks that form the index. Why they don't just use the index etf like SPY instead of buying individual stocks? Is it not ...
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Does an option trading below parity always indicate an arbitrage opportunity?

If an option is trading for less than parity, is it always a mispricing, waiting to be arbitraged, or are there other factors that can lead to this?
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How are ADRs priced?

How is the price of an American Depository Receipt (ADR) determined? An American Depository Receipt is a receipt that a non-U.S. share is held by a bank on behalf of the receipt holder. If you hold ...
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How does the value of an asset (valued in two different currencies) change when the exchange rate changes?

Suppose an asset is traded on two different exchanges in different countries having different currencies. In an ideal world without transaction costs, tariffs, taxes or delivery costs etc, the price ...
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How does spot-futures arbitrage work in the gold market?

At the time of writing: According to Kitco, the spot price for gold is about $1240 per ounce. According to CME Group, futures contracts are above that price for many months ahead. Why couldn't I buy ...
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Where can I find the current price to rent ratio of the locality of my interest?

After reading an article about where to buy homes, I'm trying to do research on renting versus purchasing a home. I'd like to figure out what the price to rent ratio is as one factor of my research. ...
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ETF + Hedge ETF = guaranteed profit?

If I own an ETF (say based on the S&P 500) and also a short on a correlated index (e.g. SH), does that mean I am guaranteed to win in either extreme market condition? I simply sell the one that is ...
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Arbitrage with a limit order

The usual notion of arbitrage involves putting two market orders at different exchanges. These orders are immediately executed at different prices and I earn the price difference. Is there a special ...
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What is the principle of forming an arbitrage strategy?

I have heard that the arbitrage strategy follows the principle of "short in expensive, and long in cheap" (Or, maybe, it was "short in cheap, and long in expensive."). I wonder how to explain this ...
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Why does the currency carry trade work?

I understand the carry trade mechanism, but I wonder why it works, or why it doesn't work. Each currency has an interest rate associated with it. The Yen (JPY) has historically had a very low ...