Ladder Finance Introduce : Arbitrage
Overview:
Markets don’t always work efficiently, and arbitrage is the art of taking advantage of these inefficiencies. ARBITRAGE is a strategy that seeks to capitalize on price differences in the market to make a profit. In this article, we’ll explore the concept and principles of arbitrage, its main strategies, and what you need to know to successfully arbitrage.
The concept of arbitrage :
Arbitrage is a trading strategy that seeks to capitalize on price differences between the same asset or financial instrument in different markets. Ladder Finance applies this strategy only between futures and spot. The strength of arbitrage is that you can pursue profits regardless of market conditions or price fluctuation.
How arbitrage works?
The Principle of Price Equilibrium: Arbitrage is based on the principle of price equilibrium. In the market, the same asset or products should have the same value in both the spot and futures markets, so any difference in price creates an arbitrage opportunity.
※ Ladder Finance does not generate premium profit and hedges from options on arbitrage.
Simultaneous trading : Arbitrage takes advantage of price differences by executing trades in multiple markets at the same time. This requires fast trade execution and market monitoring.
Key arbitrage strategies
Price arbitrage : This strategy involves buying the same asset in both the spot and futures markets at a low price and selling it at a high price to make a profit.
Statistical arbitrage : A strategy that capitalizes on price differences between similar stocks or derivatives to make a profit.
※ This is not commonly used in Ladder Finance because no matter how high the correlation between two similar assets is, the likelihood of an outlier occurring at any given time is tens of times higher than in a typical stock market due to the nature of crypto markets.
Precautions
Quick Execution of trading : Arbitrage requires that trades be executed quickly during the time when price differences occur. Depending on the nature of the token and the state of the network, deposits and withdrawals may not be smooth, especially when arbitrage opportunities are found on other CEXs.
Monitoring the market conditions : Arbitrage opportunities can fluctuate based on market conditions, so you need to constantly monitor the market.
This article will help readers understand the concepts and principles of arbitrage, identify the main arbitrage strategies, and familiarize them with the precautions for successful arbitrage. Arbitrage is a strategy that seeks to exploit market inefficiencies for profit, and it’s an attractive strategy that can be successful with careful analysis and execution.
Disclaimer
1. The crypto asset management company shall not be held responsible for any losses incurred from crypto asset investments.
2. The company disclaims any liability for losses arising from inaccuracies in the information recognized by the investor.
3. The company shall not be held liable for losses resulting from external factors such as legal, regulatory, or government actions.
