Thread: Risk Free Arbitrage with Spread Betting

Perhaps City Index found him, after all, In all the spread betting accounts I've opened, they consistently have a clause saying that you agree to not use it for hedging etc.. Pretty sure this is the reason.

He knew a lot of!

Hallo PeterM,

Thank you for letting us understand the system,

Would you be so kind to upload your own spreadsheet document to take a peek at your cost calc. Formula to find the best cost settings for this arbitrage egy?

Thank you a lot.

Hey Peter,

Can you still use that egy? How is it going? Are you still using the identical broker and spread betting firm?
Also I would like to ask about spreads. How can you deal with them? Can you wait until profit covers them?

All of the best

Originally Posted by ;

quote No, As I stated at the beginning of the thread Mr P isn't the original author, credit where it's due if that is indeed the man but I'll say again the initial article was written by Roby Burns years back a very talented share trader who I have a lot of admiration for. Here is the URL to a system that the man does not use. Because.... Well what would you think? Http://www.financial-spread-betting....adbetting.html

Well, this thread has been dead for some time but this is what I think ...

I checked that the supplied pointer to the 'origina articlel' and ... there's a clear Credit to Peter Marsden under the post's title!

Additionally the content of the report starts as a replica of the initial post and after that it supplies additional information that's obviously taken from PeterM's answers to subsequent questions. That should have been obvious even if the charge line was missing in the time.

So all in all, Siam is incorrect and PeterM is the author.

Thanks for listening.

Peter has told you only one half of the truth regarding the Arbitrage, which is no Arbitrage. It united with a great deal of hurdles, and is a statistical arb. With 3 following Articles I will reveal to you the mathematical foundamentals of this trade, its minimum conditions and its own issues to realize.

It'll be a fair overview and expansion of all the preceding Articles.
...r^2
As a teaser for today: your GROSS Gain potential of this transaction is: ...E(arb) = E(--------)
...1 r
r .... Percent Change in X-rate

Originally Posted by ;

quote Well, he could be dead.

That is optimistic

It took quite a while, till at least one severe interest was raised, which I've missed (sorry tradershads ;--RRB-). So I will continue my expliions (perhaps a little shortened).
Above GROSS Profit formula could be reduced to E(r^2); this way symmetrical profits are assummed for positive r and also for damaging r.

E(r^2) brings memories of the term: E(r^2) - E(r)^2

Encourages VARIANCE

we see our gross Profit is a function of Variance, the Variance of the x-rate
to get a sense for the gross profit potential of a PETERbet we could assess the historcial variance/volatility or the suggested variance/volatility of the x-rate.

For GBPUSD (without BREXIT!) Yearly Vola is at highest 10%
that results in an yearly gross profit of 10%^2; i.e. 10% of 10%, 1% or 100 basispoints

to acquire a net Profit amount, we have to subtract prices (bid/ask, financing, other expenses (eg Money Transfer, etc.))

taking place positions we have 2 bidaskspreads of about 4 basispoints, maybe not much
but average brokers employ a Charge of /- 0,75% p.a. (I know Agents robbing around 3,00% p.a.!!!) For calculating roll,
we have a Long AND a Short Position, therefore our total financing cost is 1,50%
or 150 basispoints

there goes the internet profit ....


Ok, let's be somewhat more clever, we hunt, and we hunt, and we hunt,
finally we loe two Agents offering Forwards / Futures contracts

financing is no issue anymore, we are trading the term construction thru , either we buy a Forward above place (negative term competition) and sell a foward above place (positive term competition)
or we buy a Forward below place (positive term competition) and sell a Forward below place (negative term competition)
that sounds much too simple anyway, because do not Forget, you have to set two MATCHING rankings SYNCHRONOUSLY in two individual accounts!!!!

BUT; the bidaskspread for such a contract is of course much larger, 10 basispoints are plausible, 2 rankings make 20 basispoints,
duration of a Forward is usually 3 month, so we have to roll our position 4 times a year!

I will from now on focus on a mere 3 weeks standing, price: 20 basispoints
expected gross Gain: 25 basispoints

expected net Gain: 5 basispoints

but what is our yield???
It is defined by our upfront Investment and our web yield.

Our upfront consits of the bidaskspread and the MARGINs we have to deliver

a stupid calculation would therefore be: mounted: b/a broker1 10bp
perimeter b1 100bp
b/a broker 2 10bp
perimeter b2 100bp
---------------------------
complete: 220bp
internet Profit 5bp

yield p.q. 2,27% ---------- 9,09% p.a.

Looks good, but it's crap

our gross profit depends on the MOVEMENT of the x-rate, if it doesn't move, there's not any Profit only prices.
When it goes, among our rankings gets a favorable p/l, but another goes unwanted AND THAT impacts a gross call

so as to acquire 25bp gross Gain, we need a move of 5%, i.e. among our p/ls will go 500bp to the green, but another will
be more 475bp from the red.

Even when we could transfer our margin Money involving the two Brokers quickly, smoothly and without price, we'll have to provide
additional margin funds involving 0bp and 475bp.

Taking the middle, 237bp; our up front includes more than doubled and our yield was cut in half, and we have a great deal of Liquidation risk left,
the reduced the Liquidation (shut out)risk the more money we have to provide and the reduced our yield.

And once more, the currency doesn't move, then we have a bonded LOSS*, also it goes, than we have lots of Clearing Troubles.

Yet it can be feasible, but it's a good deal of difficult work, asks for great deal of Clearing understanding, and is NOT RISKLESS

British residents (only those are permitted to trade such contracts!) May don't hesitate to contact me for more information, others I request their
comprehension, it's useless to go over theoretical profit potentials.

Joyful trading



*except we've been clever enough to write some Options on the x-rate

POST SCRIPTUM

Consider both accounts through BREXIT night and tonight (Oct 7), transferring more than 6 percent in brief and even briefer time.
No Chance whatsoever to match gross profits in time, the losing account is shut out as opposed to currency bounces back. You finish with a diminished Profit in the other, along with a realized loss in 1 account.

Those faithful out there may answer; ... however, I have set my (clever) stops ...! No comment.

Market historians may check, whether the abrupt passing of PeterM was preceded by an X-Sigma occasion in a few of the major crosses.


PPS

It nevertheless is likely to generate excess Returns,
but in a risky way,
not all comparable to the innocent Picture painted by Peter...

Originally Posted by ;

POST SCRIPTUM Consider your two accounts during BREXIT night and tonight (Oct 7), moving more than 6 percent in short and even shorter time. No Chance at all to match margins the account is closed out and than the currency bounces back. You finish with a Gain in the other, and a loss in one account. Those loyal out there might answer; ... however, I have put my (clever) stops ...! No comment. Market historians could assess, whether the sudden passing of PeterM was preceded by an X-Sigma occasion in one of the main...

Thanks for the insight, I checked this thread frequently to see any updates. . but was ideal, I looked into futures . Its quite disappointing. There are things exploitable spread? I am from the united kingdom, can we discuss? I can not PM you.