Is arbitrage really risk-free?

Quote from onelot:



do they not let you out by continually not honoring their prices and basically just running you? i know there's some complaint process you can go through to try and get reimbursal, probably doesn't work though, but was wondering if you have tried that route before and if anything came of it.
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Correct.

We go through that process 10 to 20 times a day; kangaroo court ...
 
Quote from metooxx:

The biggest trouble is when you are disputing the trade; it is getting seriously worse.

This takes about an hour or two...
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Do you have to stay in the trade the whole time!? You must go nuts. Do you get compensated? If not, why do you do it? I mean, I guess keeping them in line is neccessary for your profitability, but you must take some hits doing so.
 
Quote from 0008:

Near every text book says arbitrage is risk-free. If it was true, why didn't all the institutions trade on it and never had any loss?
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True arbitrage is risk free.

But the more who know of an opportunity the smaller the pot.

Buying gold in the US for $8 an ounce and selling it milliseconds later in Europe for $12 is extremely low risk. Anyone who can find this will use large amounts of money and do it over and over and over again.

So since all of the buying of gold in the US is going on it goes to $10 an ounce while all the selling of Gold in Europe it goes down to $11. The spread narrowed. Soon it gets to 11.55 in the US and in Europe it becomes $11.60


The spread narrows. One of the reasons I do not ever talk about any sort of arbitrage opportunities. Helping others won't match what I can make.

There are forms of risk Arbitrage. Where you aren't dealing with the exact same thing. Then you have news that can potentially hurt the deal.

A buddy of mine once found an opportunity with a few small stocks where if you were a shareholder you could buy stocks directly from the company for a 10% discount.

They didn't have in the contract this was for small shareholders only. He ran a fund, he was able to get some rather large backing for his opportunity and pissed off a few CFO's in the process as he would pour millions into these programs.

Soon the writing was changed to say this deal is for small shareholders, with a limited # of shares you can buy

Robert
 
Quote from onelot:



Do you have to stay in the trade the whole time!? You must go nuts. Do you get compensated? If not, why do you do it? I mean, I guess keeping them in line is neccessary for your profitability, but you must take some hits doing so.
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Yes.

Not usually.

To keep them honest, sort of.

Our biggest...
 
Quote from 0008:

Near every text book says arbitrage is risk-free. If it was true, why didn't all the institutions trade on it and never had any loss?
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There was a group of hedge funds that were doing risk arb (slightly different form with a different underlying contract)

They figured they had no risk grew, and grew, and grew.

So later on in the 80's a few deals blew out and with it blew out the funds.

It has happened.

Robert
 
Our biggest..

wow, it's amazing with that type of regularity and size you can maintain positive expectancy. i guess that goes to show the potential of arbing, or in the very least the efficiency of your system.
 
Quote from onelot:

Our biggest..

wow, it's amazing with that type of regularity and size you can maintain positive expectancy. i guess that goes to show the potential of arbing, or in the very least the efficiency of your system.
More...
It's a numbers game...

nitro
 
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