arbitrage trading company

[sak07]

Okay I could just be a nieve student dreaming of riches...but...I've noticed the last few times that I've checking prices that there is so much oppurtunity to arbitrage between spreads. Now this is riskless and tax free profit waiting to be taken! Now I know that arbing is risky...if it goes wrong...and there is timing and margin payment problems but in theory do you think I could make it work.

I was thinking of having four or five guys online constantly monitoring prices looking for arb oppurtunities and executing at exactly the same time....timing would be made easier because there would be several people monitoring and executing. If they were in the same room as well I can't see it being a problem. Does anyone agree that this could work...or Im I just being neive?

If you're interested in arbing or know anything about it I'd appreciate any advice.

p.s anyone interested in a job,....and can invest about £5,000 into my venture let me know..

job requirements - greed and balls of steel

 

[anley]

Sak

I theory........perhaps.

But in reality no, there are no short cuts. After a few trades your style will show up as an arb and they'll quickly shut you down, and that's just one of your problems.

Concentrate your time and effort in grinding out profit month after month. A lot harder to do sure because most want the instant action and ability to make the fast money. But then we all know what happens to the majority.

Anyway, good luck with whatever you do.

 

[delboy trotter]

Very true!

 

[MCGF]

Very true!

I worked for a period with the sports traders in a fixed odds betting firm for a short period-and it doesnt take long at all to work out whose using an arbitrage system-i know it may be slightly different but im sure its exactly the same with spreads-there are a few tell-tall signs and traders could actually predict who certain customers were going to back as soon as they rung up based on what other people of there ilk had already done.

If theres free money to be had, you should take it but these companies are operating a business and the only people they will let take money off them for any period of time are people offering something in return i.e inside information-harsh but we would all do exactly the same thing

But good luck with your plan

 

[sak07]

I don't understand how the SB companies would know that I am arbing...if Im using two or three companies then as far as they are concerned I am simply taking a position whether longing or shorting and they wouldn't know that I am taking an alternative position with another company...or would they? Besides can SB's do anything about it even if they know I am arbing...I am still an account holder as far as they are concerned and I wouldn't be taking all my profit from one SB company.

 

[shadeed]

Your trading pattern would show that all your trades were arbs and they would soon put a stop to it. Yes they can do something about it - they can either refuse your bets, offer you non-arb spreads, limit your trade size or simply close your account. The fact that you are not taking all your profit from one company makes no difference, so long as any of them are losing consistently to you they will want to put a stop on it. You will be able to take advantage for a short time and, by opening different accounts in different names you can prolong that but they will get you in the end!

 

[delboy trotter]

sak07,

This has been covered in previous posts. But here is a quote from an insider on this board (Probookie)

"The most successful clients are arbitrageurs who, by definition, always win. These people open up spread betting accounts with 4-5 online bookmakers and then spend their time trading on arbs when daily prices get out of line. For example, at 7.15pm on the night of a chaotic FOMC announcement, you might see one company with a daily FTSE price of 4200-08, and another with a price of 4212-20. The arber buys the first, sells the second and locks in a certain profit.

Clients who do this are very obvious to the dealers on duty, as arb trades stick out like a sore thumb on a client's trading record (all trades are opened out-of-hours and are on daily products, all trades are left to expiry). After a brief honeymoon period they find that an unusual number of online trades are being rejected. Arbers hate this, as it typically leaves them with an exposed position on the non-rejected leg of the trade, which they then have to either take a chance on or close off, incurring spread."

regards,

dbt

 

[adrianallen99]

They may restrict trading or limit the amount of £/point you can place.

 

[albtius]

They may restrict trading or limit the amount of £/point you can place.

I am new to this board, but what never stops amazing me is how most people posting here act as pro's in everything they say. Take the quote above for example. Thay "MAY", that's the KEY Word. May means, that you have no ****ing idea of what you may or may not know. It's just your opinion.

Personally, I only like to post as well as read threads that I know are based on experience, and on that only. No If, but, maybes...

They say trust only 1/2 of what you see, 1/4 of what you hear, and NOTHING of what you read...Heheh...Funny but true..

Best Regards,
Albtius

 

[stevespray]

Arbitrage between parallel markets.

This has been discussed on several boards over a period of years. It is very much a grey area. Obviously by ‘parallel markets’ we mean spreadbet and CFD’s (or anyone else who makes a market in comparable financial instruments).

A number of spreadbetting companies have openly stated that they don’t like traders who arb between markets. This is basically because, over an extended period of time, these customers will slowly but surely make some quite large sums of money. Implicitly the spreadbet companies aren’t going to like anyone who appears to have a sure fire way to make money. There are however some other points which need discussing. The first one is that of an efficient market. It is widely publicised that certain spreadbet companies like to bias prices from time to time. ‘Bias’ covers several areas. For the most part a company will quote a price which is most financial beneficial to them. This takes into account all information that the company has available to it regarding current market conditions / direction and also current customer activity. Once it all goes into the mix a dealer uses his experience to produce a price.

We need to consider that arbitrage is not an illegal activity and is wide spread across many markets the world over. The only reason that the spreadbetting companies take a dim view is because customers are almost guaranteed to win. Because of this they will make up reasons why arbitrage is unfair. They don’t however consider that arbitrage activity is a natural part of market activity which makes for an efficient market from a customers point of view. If a company wishes to bias its market higher then there is obviously a risk that someone will sell that market and hedge their exposure in another market or similar instrument with a different company. This is surely a risk of biasing your quoted market ? Any dealer which does bias a market is doing so because, in their opinion, it is financially beneficial to do so. To have a policy of deterring arbitrage is, in effect, saying, to the customers, that they require an unfair advantage in making their market prices. Obviously if a company makes it prices in a manner which is financially viable for them then it is at the cost of the customer. Arbitrage activity, in effect, forces companies to quote prices which are fairer or more balanced. In my opinion, any company which tells you that they don’t like arbitragers is doing so because they like to keep an ability to vary its markets in a manner which is to the overall detriment of the customer.

The bottom line is that arbitrage activity is very much a part of an efficient market. Also, I would have to suggest that the targeting of customers who, it is believed are arbitraging, would be an abuse of a companies position as market principle. Surely, if spreadbetting companies are deemed ‘execution only’, the detection and subsequent harassment of a customer would be unethical ?

Steve.

 

[stevet]

if someone is successfully arbing spreadbettting companies - good luck to them - but the whole point of arbing is to have a low risk trade that you can do many times over, since the profit amount opportunity would theoreticlaly be low, and therefore you could not sustain too much loss when only end up with one side of the trade , which of course is again what happens in arbing reguarilly, but those losses should be far less that the profits obtained on the succesful legs of the arb

i dont spreadbet, but getting in and out of spreadbetting trades seems to be the big frustration talked about on this site - so it would seem that arbing with spreadbetting would be a very high risk occupation

 

[Bono]

Very interesting points!! what if you arb a trade with someone else or a syndicate?
Would this show up to the SB companies?? will investigate a bit more and see if it's viable.

 

[stevespray]

Bono + Stevet

Obviously there are certain aspects of arbitrage trades which will be obvious to some of the companies. Several of the companies have contradicted themselves on certain issues over a period of time. Representatives have stated that they never analyse winning customers because there is no benefit in do so and then, at a later stage, stated that they do, from time to time, detect arbitrage customers.

Arbitrage trades will have a number of characteristics about them which may make them stand out from normal trading activity. Firstly there will generally be bigger bet sizes. Secondly they will generally be left to run until expiry (in the case of daily bets which are maintenance free after they have been placed). In this situation the company would find it easy to detect you on the basis that you were consistently leaving bets until expiry on certain markets. This practice also means that the company is not getting full value on its spread because it only collects half its spread on the instrument as the closing is done at mid price.

I guess if you were going to arbitrage then the company could do things to try and stop you. On the basis that you have to open two legs of the bet there is always going to be a point where you only have one leg open. With that in mind it would be best to establish which of the legs was the ‘value leg’ ie the side of the bet which was furthest away from the general consensus of where the market really was. At least this way you would be taking the smallest risk. Once you have established that the value leg is open you would then have a choice of several companies to arb off with. On that basis it is unlikely that you wouldn’t be able to hedge with at least one of them.

Steve.

 

[waverider]

A couple of things can be done to keep your head below their radar, although at a loss of some profit: presumably the trades will be taken at a point where the quotes have moved widely apart between each SB, don't wait to expiry but exit both when they move back in line; and don't just arb trade, trade other strategies and just arb occasionally so they occur in amongst general trading losses. Just some thoughts.

 

[waverider]

It's also the case that arbitrage is not just a normal part, but an essential part, of the market. SBs banning arbs is akin to price-fixing.

 

[stevet]

stevespray

regardless of what you do - there is always going to be the risk of ending up with one side of the leg open - not a problem when you are doing normal arbing - since the opportunities occur on a regualar basis and arbing methodology means that over time - you end up winning

but arbing spreadbetting companies - where the pricing is not transperent, and where you have no analytical methodology to discern the fill opportunity, and where the opportunities are random in the occurence - would certainly make it hard over time to profit

sports spreadbetting arbing may have a lot more potential - and maybe where the concept of arbing spreadebetting companies arises from, maybe a lot more feasible - due to the weight of each companies customers moving the market - but i am only surmising this as i dont have a clue about sports spreadbetting!