Arbitrage Strategy
- Thread starter Hammy27
- Start date
you are kidding right? see examples above. or link below. if have problem with english-there is links on left side in many other languages.read very first sentence. i personally would call it (and OP approach)something like market neutral. OP-2600 trades a week? commissions+ spreads will eat you alive in very first month.just try it live.
http://en.wikipedia.org/wiki/Arbitrage
on top of that OP probably is going to use margin account and margin doesn't come for free either.
So you are you saying that you don't consider mean reversion pair trading to be a form of stat arb?
One can obviously put on a market neutral spread and not be relying on a statistical relationship for the trade. But, trading a pair for mean reversion almost always relies on some sort of statistcal property of the spread. Hence, Stat arb lol
no..cause it's not arb. maybe for you..maybe you like the name,cause it sounds cool or something.. or maybe you think that it was "risk free"...it's not. arb is risk free. get this trough you head.(Joe Pesci).
here is the simplest form of arbitrage that helps me buy my first PC for trading long time ago. two stores are selling same product-you buy it in one(cheaper) and return to another store for store credit(higher price, often x2 or more). YOU HAVE NO RISK in this transaction,cause if they refuse to accept this item-you simply return it back to initial store. i use to call it store arb..
i've been trading "market neutral systems" for decade or so..large basket of stocks against certain ETF's,pairs back in 2002-3..and i still called market neutral.cause there is a PLENTY of events that can happen thru the day(forget about hold it for a week or more). all my positions are closed EOD. so..go head, feel free to give me a lesson...
stat abr..one leg halted,opens up +\- 50% on middle of the day..yeah..stat arb..or stock that use to correlate 90%+ slips 30% away in 30 min of trading..it's all happens to me in the past..stat arb my ass
http://en.wikipedia.org/wiki/Statistical_arbitrage
Quote from Shanb:
You mention the word 'betting', 'co-integration' and 'convergence' 'news event'.So its not risk free and its not a true arb, because things may or may not go well. This is just as similar as me trying to short Nikkei 225 and Long USD/JPY pair. You think its stat arb ?
Good luck
Isn't arbing "netting" an imbalance? what does that have to do with pairs trading?
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I think risk arbitrage is the more appropriate term. Although in some circles I guess risk arb and stat arb can be synonymous.
Are these considered arbitrage?
A fun manager with 1Bil AUM front run leveraged ETF or index futures with his personal$ right before dumping-investing 1Bil of client's $ into stocks of the same area
A fun manager buys, say any highly leveraged futures or fx pair with clients$ & short the same instrument simultaneously with his own$. If it goes up, he gains track record & 25% performance fee. If it goes down, he keeps management fee & his own big profit.
A fun manager with 1Bil AUM front run leveraged ETF or index futures with his personal$ right before dumping-investing 1Bil of client's $ into stocks of the same area
A fun manager buys, say any highly leveraged futures or fx pair with clients$ & short the same instrument simultaneously with his own$. If it goes up, he gains track record & 25% performance fee. If it goes down, he keeps management fee & his own big profit.