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Saturday, 5 December 2015

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How to play the Game of arbitrage while trading in Stock market


There are many ways to trade with minimum risks in the stock market. Some traders use the fundamental analysis and long term trading as the way to trade effectively in the stock market. A long term investment with a diversified portfolio is one of the ways to trade with minimum risks. Other ways include the arbitrage techniques as well as spread techniques of trading. In this article we will discuss in detail about the arbitrage technique.
The arbitrage technique can be practiced in two ways. One is to trade inter exchange arbitrage. In this case the same stock is bought and sold in two different exchanges. Thus a limited profit is incurred based on the price difference between the stocks in two different exchanges. This profit is maintained even when the prices of the stock at the two exchanges changes.
The other technique is cash futures arbitrage. In this technique the same stock is bought and sold in the cash and futures market. The stock is usually bought in the cash market and sold in the futures market. Thus the trader will incur a profit based on the difference between the prices of stock in the cash and the futures market. At the expiry of the futures contract the trader can initiate the buy and sell calls again and can make the profit. The only negative aspect about this type of trading is the investment of the trader gets blocked in this type of trading and the returns are not usually very high in case of the arbitrage trading.

Another risk free way is to trade on the basis of the advice from the advisory firms. These advisory firms provide accurate stock market tips to their clients. Money classic research is one such reputed advisory firm.

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