In gold investment , arbitrage transactions can generally be divided into three categories: inter-period arbitrage, cross-market arbitrage and cross-commodity arbitrage. Carry trading is a low-risk, high-return risk ratio market trading behavior. So how to make arbitrage in the process of speculating in gold ? What principles need to be followed?
- The principle of corresponding buying and selling direction
That is, a sell position is established at the same time as a buy position is established, rather than a buy position only, or a sell position only.
- The principle of equal quantity of buying and selling
When a certain number of buying positions are established, an equal number of selling positions must be established at the same time, otherwise, the mismatch of the number of long and short positions will expose the position and face greater risks.
- Simultaneous hedging principle
When the arbitrage position reaches a certain desired profit target after a period of gold price fluctuations, it is necessary to settle the profit through hedging, and the hedging operation should also be carried out at the same time. Because if the hedging is not timely, it is likely that the long-term profit from the spread will disappear in an instant.
- The principle of contract relevance
In gold futures , arbitrage is generally carried out between two contracts with strong correlation, not all varieties (or contracts) can be arbitraged. This is because, only when the correlation of the contract is strong, its spread will return, that is, the spread will expand (or shrink) to a certain extent and return to the original balance level, so that there is a basis for arbitrage, otherwise , arbitrage on two uncorrelated contracts is no different from one-way speculation on two different contracts.
- Simultaneous construction principle
Generally speaking, the establishment of long and short positions should be done at the same time. Given the volatility of futures prices, trading opportunities are fleeting. If you cannot open a position at the same time, the spread may become unfavorable for arbitrage, thus losing the opportunity for arbitrage.
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