CASH AND CARRY ARBITRAGE EBOOK

In the last video he mentioned that carrying costs were significant in rational future if the carrying cost is. So I've been doing alot of research this week reading all of Arthur's blog posts, watching his seminars, and reading up on how to engage in. Cash and Carry Arbitrage, as a Natural Banking Business. To view this video please enable JavaScript, and consider upgrading to a web browser that supports.


CASH AND CARRY ARBITRAGE EBOOK

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CASH AND CARRY ARBITRAGE EBOOK


CASH AND CARRY ARBITRAGE EBOOK

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CASH AND CARRY ARBITRAGE EBOOK

A futures spread or spread is a long-short futures position that provides exposure to a spread or difference in cash and carry arbitrage prices. When actual spread between two futures contracts of the same asset widens, it is desirable to buy the near month contract since it is underpriced and sell the far month contract since it is overpriced.

When actual spread between two futures contracts of the same asset narrows, it is desirable to sell the near month contract because it is overpriced and buy the far month contract because it is underpriced.

Key Financial Market Concepts, 2nd Edition by Bob Steiner

Spreads cash and carry arbitrage be intracommodity or calendar spread with same underlying but with different maturities, or intercommodity with different underlying typically having same maturity or on different exchanges using futures on the same underlying.

Exchanges generally have less strict margin requirements for futures spreads because through spread trading, speculators face reduced risk compared to trading outright futures.

This happens because the long and short futures that comprise a spread are cash and carry arbitrage correlated and tend cash and carry arbitrage hedge one another. So the technical specifications of agri commodities assumes more significance than lets say precious metals, as these agri commodities have a limited life span and also within this life span, its proper storage assumes importance as if not stored in a proper environment, there would be chances of deterioration in its quality and thus, knowledge of the commodity, its technical specifications, its life span, its proper storage assumes more importance here, to mitigate the risks involved in such cash and carry arbitrage.

Example of Cash-and-Carry Arbitrage Consider the following example of a reverse cash-and-carry-arbitrage. However, since the barriers to participate in arbitrage are much lower they allow more players to attempt such a trade.