Classic arbitrage on sliders
Classic arbitration refers to "risk-free" operations. If all the rules are strictly observed, most of the risks associated with the uncertainty of the instrument's price in the future are excluded (these risks are typical for speculation). At worst, the risk of not getting enough income remains.
The use of the futures contract market provides ample opportunities for high-yield transactions with limited risk. One example is arbitrage on spreads between the spot market (e.g., the stock market section of the MICEX) and futures (RTS derivatives market - FORTS). This spread is also called "basis" or "spreading".
Differences in market participants' expectations of future price changes of the underlying asset, as well as interest rates for different periods lead to the fact that prices for the futures contract and the underlying asset constantly fluctuate in relation to each other (their prices are "converge" and "diverge"), resulting in the possibility of conducting arbitrage operations.
The essence of arbitrage on "sliders" The trader simultaneously sells a futures contract and buys a spot (selling the spread) on the "spread"; after the spread shrinks, the trader performs the reverse operation: buys the futures contract and sells the spot (buying the spread). In this case, the difference in the selling and buying prices of the spread, the trader receives in any case, regardless of price fluctuations in the market.
An example of classic arbitrage on sliders
Consider the arbitrage situation with the example of the futures and Rosneft stock.
For example, in the morning we see that the futures price RNZ0: 21304 rubles, and the share price ROSN: 212.79 rubles.
Sell one RNZ0 futures: 21304 rubles.
Let's buy 100 shares of ROSN: 212.79*100 = -21279 rubles.
Sliding: 21304 - 21279 = 25 rubles.
At lunchtime, the value of Rosneft futures fell relative to the stock. The value of RNZ0 futures: 21290 rubles, and the value of ROSN stock: 212.87 rubles. Let's close previously opened positions.
Sell 100 ROSN shares: 212.87*100 = 21287 rubles.
Let's buy one RNZ0 futures: -21290 rubles.
Split: 21287 - 21290 = -3 rubles.
At the time of writing this article, the commission at MICEX was calculated as 0.0035% of the transaction volume, and the commission at FORTS is fixed and for RNZ0 was 1 ruble per contract.
Let's assume that the broker's commission is equal to the stock exchange commission.
Let's calculate the result:
Revenue: 25 - 3 = 22 rubles.
MICEX commission: (21279+21287) * 0.000035 = 1.5 rubles.
FORTS commission: 2 rubles.
Broker's commission: 3.5 rubles.
Net income: 22 - 1.5 - 2 - 3.5 = 15.0 rubles.
Advantages of classical sliding arbitrage
The main advantage of classical arbitrage is the low risk of capital loss (almost impossible) and a stable income from operations.
Disadvantages of classic sliding arbitrage
The main disadvantages of classical arbitrage on sliders is the extremely low yield.
The main arbitrage instruments on the Russian stock market are: GMKN, LKOH, SBER, SBERP, GAZP, ROSN. Let us consider the breakdowns of the main classic arbitrage instruments for the period from 15.09.2010 to 13.10.2010 in the figures.
