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Arbitrage Strategy

 We offer a specific methodology in a market populated largely by financial institutions and multinational corporations. Utilizing our proprietary trading strategies, we target consistent, double-digit returns for our clients.

Please read more about our strategy thoroughly and decide if it is suitable for your investment portfolio and long-term investment objectives. Read More...Learn more about different arbitrage strategies below.

  • Statistical arbitrage is used in equity markets. It involves time series analysis, a statistics technique that looks for patterns or structures within data collected over time.
  • Merger arbitrage attempts to exploit differences between the stock prices of one company and another company it will eventually merge with or acquire.
  • Fixed income arbitrage looks for mispricings in interest rate securities.
  • Convertible arbitrage involves mispricings of convertible bonds, which can be turned into common stock.

 

The ArbitrageRoom.com
Arbitrage Trading Strategy
Arbitrage opportunities

We perform a hybrid of the carry trade that benefits directly from the highest yielding interest rates of the G10 currencies and then enhance those returns using minimal leverage. It is an arbitrage based strategy that significantly decreases risk to principal and eliminates both sharp draw downs and pricing risk. The strategy is geared towards protecting principal while providing consistent double digit returns for our clients.

Our methodology is not correlated to the global equity markets and therefore has remained largely unaffected by the recent credit and equity market turmoil.

Our methodology, coupled with our global technology partners greatly reduces both transaction and execution risk while targeting double-digit returns for our clients.  The methodology produces pure alpha and provides significant protection to principal.

View the Fact Sheet Our methodology, termed the Global Return Strategy is available for cash accounts, IRA's, SEP's, 401k's and other retirement plans. The strategy is designed to outperform similar fixed income alternatives such as annuities, CDs, money markets and bonds. Our trading methodology is described in more detail here.

After reading our methodology, please contact us with any additional questions.

Call 1-866-970-9339 for more information.

 
Arbitrage : Examples

Academically, an arbitrage is a transaction that involves no negative cash flow at any probabilistic or temporal state and a positive cash flow in at least one state; in simple terms, a risk-free profit. In more general terms, arbitrage is the practice of taking advantage of a price differential between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices.

Below are a few more examples of arbitrage scenarios:

  • Suppose that the exchange rates (after taking out the fees for making the exchange) in London are £5 = $10 = ¥1000 and the exchange rates in Tokyo are ¥1000 = $12 = £6. Converting ¥1000 to $12 in Tokyo and converting that $12 into ¥1200 in London, for a profit of ¥200, would be arbitrage. In reality, this "triangle arbitrage" is so simple that it almost never occurs. But more complicated foreign exchange arbitrages, such as the spot-forward arbitrage (see interest rate parity) are much more common.
  • A common arbitrage involves borrowing at lower short term rates and investing at higher long term interest rates while pocketing the spread. The risk is that short term loan rates rise higher.

  • One example of arbitrage involves the New York Stock Exchange and the Chicago Mercantile Exchange. When the price of a stock on the NYSE and its corresponding futures contract on the CME are out of sync, one can buy the less expensive one and sell it to the more expensive market. Because the differences between the prices are likely to be small (and not to last very long), this can only be done profitably with computers examining a large number of prices and automatically exercising a trade when the prices are far enough out of balance. The activity of other arbitrageurs can make this risky. Those with the fastest computers and the smartest mathematicians take advantage of series of small differentials that would not be profitable if taken individually.
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Conventional Wisdom?

The Perfect WidthThe global financial crises has prompted the emergence of investment strategies that help investors mitigate risk.

Corporations and banks have been utilizing similar strategies for decades.

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Sample Arbitrage Trade

Example - Arbitrage Currency Trading

Exchange rates of the EUR|USD, EUR|GBP, GBP|USD pairs are 1.1837, 0.7231, and 1.6388 respectively. A trader could buy one mini-lot of EUR for $11,837 USD. The trader could then sell the 10,000 Euros, for 7,231 British pounds. The 7,231 GBP, could then be sold for $11,850 USD, for a profit of $13 per trade, with no exposure since long positions cancel the short positions.

Using lots of 100K, the trade yields a profit of $130.

Flow of Funds








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