Strategy & Returns

An Overview of Historical Arbitrage Strategies

Markets Reward Arbitrage

The large profits available

encourage price stability across markets.

Deployed Strategies

The top emerging arbitrage opportunities exist outside of traditional securities contexts and generally produce higher returns due to the current lack of competition:

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  • Online Advertising Arbitrage

  • Real Estate Arbitrage

  • Domain Arbitrage

  • Retail Arbitrage

  • Business Arbitrage

  • Rent Arbitrage

  • Wholesale Arbitrage

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For more traditional arbitrage within securities, we refer readers to banks or broker-dealers who are registered to deal and advise in these asset classes: 

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  • Put Call Parity Arbitrage.

  • Corporate Bond Arbitrage.

  • Treasuries Arbitrage.

  • Forex Pair Arbitrage.

  • ADR Arbitrage.

  • Dual Listing Arbitrage.

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Please keep in mind, securities market arbitrage are mature markets and with the emergence of market makers like Citadel Securities, even large institutional banks are being squeezed out of those spaces. Unless you intend to have an algorithmic edge, it may be best to focus outside traditional competitive securities arbitrage.

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Time Arbitrage

Taking advantage of the inherent default human nature to focus on <12 month timeframes, ergo most future valuations are discounted beyond capital costs and on the balance, risk. Bill Ackman's Pershing sources major profits from this strategy. Non-deterministic compute is proving quite useful in this space for multi-scenario predictors. 

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Value Arbitrage

Using capital at lower rates to buy cashflow at higher rates. Typically focused more on capital cost vs. cashflow arbitrage, hence buying and holding is a valid execution of this strategy. Berkshire as an example of the most prolific player in this space.

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Market Arbitrage

Taking advantage of the immediately available pricing discrepancies between markets. A beginner's game, it is unethical to squeeze these margins and leave nothing for the young upstarts. We purposefully advise handicapping algos to leave opportunity for the new up and comers to learn and hone their craft.

 

Securities Arbitrage

In the world of mature markets such as securities market arbitrage, the game is highly evolved and highly competitive. There exists only room for highly advanced algorithmic traders with billions in highly liquid capital and patience to develop and train new algorithms in current market conditions. New readers may wish to not attempt to compete against securities arbitrageurs in highly regulated markets. A doctorate in mathematics and $100MM in risk capital is often a wise hurdle before considering an entry to this arbitrage market.

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Consistent Returns

Arbitrage opportunities are based on spreads:

Uncorrelated to market performance.

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General information only: Arbitrage TODAY IS NOT A REGISTERED FINANCIAL ADVISOR and does not purport to be one. Arbitrage Today is not your financial advisor and does not provide personalized financial advice. All information, opinions, reports and research is for a general audience, is for informational purposes only and is therefore not tailored to your specific situation. Information provided is intended as a starting point for your own research, due-diligence, and decision making process. Your decision making process may include the services of a professional registered financial advisor. Arbitrage Today is not an advisor. It is the policy of arbitrage today to ensure all information and advice given is for a general audience, is not changed or tailored for any one individual or user, and not suitable for any personal situation.

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Risk Warning: Arbitrage trading and/or investing involves risk of loss. Results are not guaranteed and results can vary. Past performance is not a predictor of future results. There is no guarantee of specific results and results can vary. All trading and/or investing involves risk. Your capital is at risk when you trade and/or invest - you can lose some or all of your money. You should not risk more than you can afford to lose.

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conflict Disclosure: Arbitrage Today, its shareholders, directors, owners, affiliates, subsidiaries, employees, contractors, executives, consultants, subscribers, contributors, or syndicators  may have interests in the arbitrage strategies or products discussed. it is the policy of arbitrage today to require its contributors to disclose any material conflicts in the article disclaimer & disclosure section. Please read the disclaimer and disclosure section carefully. The disclosures and disclaimers are not required to be updated after 48hrs from publication and readers are advised that circumstances and positions may change.

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LIABILITY Disclaimer: Arbitrage Today shall not be held liable for any losses, arising from trading and/or investing or otherwise. Arbitrage Today does not warranty the accuracy or completeness of information on this website and all information, articles, reports and materials are provided on an as-is basis with no warranty, implied or otherwise,  in any way, shape or form. Please read our full terms of use for all applicable disclaimers and limitations of liability. Arbitrage today is under no obligation to update content and as such, opinions may change over time and arbitrage today may not update past articles and content to reflect updated opinions or positions. 

 

Income Disclaimer: Examples of successful trading and/or investing strategies are often highlighting the top players, strategies, firms and companies in the industry and results are not typical. actual results may vary greatly and actual returns may be far less than the hypothetical highest potential returns discussed. Your own skill, initiative, and research are major factors in the outcome of your investments as well as market conditions, general underlying asset prices, market forces and other influences outside the control of arbitrage today, its writers, contributors, employees, management and shareholders.

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¹Cumulative total arbitrage worldwide by arbitrageurs who have made their revenues and trade volumes publicly available.

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²Low risk as defined by low beta scores. Because arbitrage returns are generally, as a whole, uncorrelated with the market and rely purely on the spread between buyers and sellers in different markets, the "Beta" is generally lower, often associated with lower risk investments. low risk does not mean zero risk. in this context, risk is relative and quantitative. quantitative measures of risks are not guaranteed to be accurate predictors of future performance.

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³Inventory may or may not be owned by arbitrage today, its shareholders, directors, executives, employees, partners, affiliates, contributors, and/or consultants. It is the policy of arbitrage today to require disclosures of any interests in disclosures and disclaimers section. readers, investors and traders are advised to read all disclosures and disclaimers for any conflicts of interest. 

 

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