The core of arbitrage is to capture price differences—when the same asset has unreasonable prices in different scenarios (markets, times, varieties), buy low and sell high to profit from the price difference, with risks typically lower than unilateral speculation.
Common methods:
1. Cross-market: The same item is cheap in City A and expensive in City B, and hedging operations are performed on both sides.
2. Cross-period: Price deviations between contracts of the same variety with different expiration dates, betting on the price difference to revert by buying low and selling high.
3. Cross-variety: Acting when there is a price imbalance in related varieties (such as upstream and downstream, substitutes).
The key points are:
• Price differences must be “accurately observed”: Use data to monitor abnormal fluctuations, excluding normal cost differences.
• Risks must be “well managed”: Prepare for issues like price differences not converging, transaction slippage, policy changes, etc., and ensure sufficient margin.
• Actions must be “swift”: Price difference windows are short, rely on systems or experience to execute quickly; if you are slow, the opportunity is gone.
The essence is to earn money from market corrections—steady but not excessively profitable, relying on win rates and execution ability.
The above content is personal opinion and for reference only.
