Arbitrage - Possible as retail investor ?

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Semper Augustus

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Hi,
This is my first post here. First I would like to greet everyone.
From what I have read so far in various threads, this place seems full of very knowledgeable people keen on helping others.

My question is, is it possible as a retail investor to make an arbitrage profit ? By arbitrage I mean a combination of trades to profit risk-free from some mispricing.
An example would be Covered Interest Arbitrage, when interest rates differential between two countries is not in line with forward currency prices.

So far, my knowledge of arbitrage has been restricted to textbooks.
I am curious, do you need pro hardwares and softwares, wholesale execution as well as massive capital to profit from such arbitrage ? Or can an individual person perform such trades on a retail level ?

Txs in advance.
 
"Pure" arb? Not unless the gods look upon you with favour (I mean, anything's possible).

But, of course you have "stat arb" guys like Ernie Chan who seem to know their beans.

As for CCY arbitrage... well doubt it.
 
youve more chance of a date with princess di.

because of the low risk (not 0 risk as you seem to fink), this is one of the most competitive areas in trading.

you may get a look in if you have an auto spreader and chose a fairly illiquid market as one of your legs. but, the software is gunna cost you upwards of ~$1000 PCM - so most retail traders will be priced out, especially when you factor in the commissions they pay due to low volumes. (arbing will have to trade a lot of contracts)

dont let me stop you though....
 
as a retail investor to make an arbitrage profit , you must have more knowledge about this and a good luck.
 
charliechan said:
youve more chance of a date with princess di.

because of the low risk (not 0 risk as you seem to fink), this is one of the most competitive areas in trading.

you may get a look in if you have an auto spreader and chose a fairly illiquid market as one of your legs. but, the software is gunna cost you upwards of ~$1000 PCM - so most retail traders will be priced out, especially when you factor in the commissions they pay due to low volumes. (arbing will have to trade a lot of contracts)

dont let me stop you though....
Click to expand...



Could you briefly describe the types of arbitrage one can do with the system you are suggesting ?

Does anyone have any link on the subject or can recommend a good book ?
 
An auto spreader is basically an extension to software that will work orders in more than one market and if one is hit will try to hit the other in an other market. (Or same market, different contract months/strategies, whatever)

Simple example, you could have an auto spreader between the SnP and FTSE futures, and trade the differential between them.

Anything you could do with one is in practice going to be completely unsuitable for a retail trader.

That isn't strictly arbitrage though, it's risk arbitrage.

Pure arbitrage would be something like buying ECX daily futures, selling dec against them, earning the differential and taking/making delivery. Or more likely hoping to do things the other way around some time int eh futre.

Anything using an auto spreader will in practice be risk arbitrage, because you can easily get legged out.
 
yeh have multiple SB accounts, wait for a big difference to appear and...well i'm sure you know the rest :)
 
Chartsy said:
yeh have multiple SB accounts, wait for a big difference to appear and...well i'm sure you know the rest :)
Click to expand...

Or you could take advantage of the several introductory schemes you find nowadays.

Basically there is very little liklihood of finding a pure arb... if I were you I would look at stat arb in equities.
 
pure arb is just like every other inefficiency, it usually fixed or reduces itself over time. Take a look at the market wizards in the 80's and 70's , taking advantage of option inefficiencies and there was a guy doing something with bonds too can't really remember lol.of course arb still exists!
 
well things have moved on a bit since then, eh?

Seriously do you think a guy in his spare bedroom is going to be able to trade pure arb with interactive Brokers and Tradestation..??
 
I've already explained my limit up/down spread betting strategy... that's pretty close to an arb... not risk free though.
 
what was that thing you did with like betting or something...like sports betting depth of market?!?! something like that lol
 
yeh have multiple SB accounts, wait for a big difference to appear and...well i'm sure you know the rest
Click to expand...

Yes the SB company that is out of line with others will bust your trades.


Paul
 
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