A Word About "Arbitrage"...
- Thread starter bone
- Start date
These "speed games" always get arbed down to zero in effect.
I personally know a trader who made $1M arbing ICE WTI versus CME Nymex WTI in 2007, and in 2008 he lost money on the trade.
And he was located directly across the street from the ICE server farm in Chicago.
Firms like Spike and Geneva and DRW spend millions of dollars per year on their ECNs.
It would just be a guess to correlate volume between the same name micro contract and a mini contract. Suffice it to say that they're highly correlated. The driver between those two contracts will be the multiplier.
I personally know a trader who made $1M arbing ICE WTI versus CME Nymex WTI in 2007, and in 2008 he lost money on the trade.
And he was located directly across the street from the ICE server farm in Chicago.
Firms like Spike and Geneva and DRW spend millions of dollars per year on their ECNs.
It would just be a guess to correlate volume between the same name micro contract and a mini contract. Suffice it to say that they're highly correlated. The driver between those two contracts will be the multiplier.
Most of this stuff isn't even about speed anymore. We're talking about extremely complicated methods to model orderbook behaviour, to predict quote movements and order impact to answer the question at which price to maintain queue position and where to pull your quote.
This is trading for the 0.001% where top notch tech setup is a requirement.
I bet that 99 out of 100 of retail don't even know that they are "arbing" a cash settled contract vs a physically delivered one which includes a whole new of new shenanigans that basically turn an arb into an account killer
Indeed. Academically speaking, the whole idea of cash and carry arbitrage depends on two things, ability to warehouse the underlying asset and (equally important) borrow cash collateralized by the underlying asset. In case of traditional finance, these aspects are facilitated by various institutions and this accessibility percolates through the system. Both of those things are "not exactly true" in crypto.
Is following correct ? and if it is then at retail level is such Cash and carry really possible as TRUE ARB?
For Cash and carry to be really effective
The futures must be based exactly on the underlying "CASH" / spot instrument
The two must be on same exchange and same broker / same account!
Must have cross margin
All cost ( Fees / comms on in and out + cost of carry + any insurance ) must be less than the diff.
Tax treatment for both positions must not hinder in calculating pure P/L
to me it seems Unless you are a manufacturer of the underlying with your manufacturing margin such "Assured profit" is next to impossible!
For Cash and carry to be really effective
The futures must be based exactly on the underlying "CASH" / spot instrument
The two must be on same exchange and same broker / same account!
Must have cross margin
All cost ( Fees / comms on in and out + cost of carry + any insurance ) must be less than the diff.
Tax treatment for both positions must not hinder in calculating pure P/L
to me it seems Unless you are a manufacturer of the underlying with your manufacturing margin such "Assured profit" is next to impossible!
An omnibus account helps tremendously (that’s not a “retail” thing). ... if you have to ask 
Commercials (Producers and Users) are always heavily involved in futures and OTC contracts for which they can make or take good delivery.
Commercials (Producers and Users) are always heavily involved in futures and OTC contracts for which they can make or take good delivery.