En
Before we elaborate on the fund’s strategy and proprietary approach, it’s important to address a few fundamental concepts and how they apply to both – the traditional and the alternative investment industry. It is also crucial to understand that each investment strategy carries its own key performance indicators, risk assessment, and target audience. Arbtrust works with digital assets and utilizes a pure arbitrage strategy to intermediate the negotiation of these assets. Arbitrage is considered a low-How we operate, what is Arbitrage, and why this is a well-know low-risk investment strategy.
Risk investment because it involves taking advantage of market inefficiencies to generate a profit without exposing the investment company to significant market risk. The concept of arbitrage has been around for centuries, and it refers to the practice of buying and selling assets in different markets to take advantage of price differences. The practice of arbitrage has been around for centuries. One of the earliest examples of arbitrage dates to the 17th century, when Dutch traders used a technique known as the "wind trade" to profit from differences in the price of tulip bulbs between cities.
These traders would purchase bulbs in one city and then transport them to another, where the demand and price were higher. In the 19th century, the advent of the telegraph allowed traders to take advantage of price differences between markets in real time. This led to the development of the "arbitrage house," a type of financial institution that specialized in executing arbitrage trades.
This practice was known as "arb" or "arbitrageur," It was a way for traders to make quick profits. Arbitrage has become more sophisticated and automated in the modern era, with computer algorithms scanning multiple markets for price discrepancies and executing trades almost instantaneously. This has led to a more efficient market. Over time, arbitrage has become a key strategy for hedge funds and other institutional investors. Today, high-frequency trading (HFT) firms use sophisticated algorithms to execute thousands of arbitrage trades every second, taking advantage of even the smallest price differences between markets. While the practice of arbitrage has evolved over time, its core principles remain the same: to identify price differences for the same asset between markets, execute trades quickly and efficiently, and generate profits with minimal risk.
Few people know, but arbitrageurs like ourselves help ensure prices stay in line across different markets in inefficient industries. They are much needed by the exchanges and/or trading platforms in which the assets are negotiated. Arbitrage is generally considered a low-risk investment because it involves taking advantage of market inefficiencies rather than taking a position on the underlying asset. If executed correctly, arbitrage trades will generate a profit regardless of whether the underlying asset increases or decreases in value.
Arbitrage trading is generally considered a low-risk strategy, which means that the potential returns from each trade are also relatively low. As a result, traders engaging in arbitrage need to act quickly and have access to a significant amount of capital to make it worthwhile, along with executing a great number of transactions constantly. To address the need for substantial capital and consistent spreads, Arbtrust has opened its quant fund and technology as an opportunity for accredited investors. At Arbtrust, we execute an average of 5,000 mini-transactions daily, with each transaction pair taking only 0.034 seconds to complete.
Arbitrage, in its many forms, can be an effective tool for investors seeking low-risk yields. Because yield is often small, it requires high volumes to realize the benefits of arbitrage and generate enough profit to overcome transaction fees. For this reason, arbitrage is generally not a strategy individual investors can leverage for themselves.
Arbitrage is a well-known and efficient trading strategy with several types, including pure arbitrage, merger arbitrage, and convertible arbitrage.
Pure arbitrage
Refers to the investment strategy above, in which an investor simultaneously buys and sells a security in different markets to take advantage of a price difference. As such, the terms “arbitrage” and “pure arbitrage” are often used interchangeably.
Many investments can be bought and sold in several markets. For example, a large multinational company may list its stock on multiple exchanges, such as the New York Stock Exchange (NYSE) and London Stock Exchange. Whenever an asset is traded in multiple markets, it’s possible that prices will temporarily fall out of sync. It’s when this price difference exists that pure arbitrage becomes possible. Pure arbitrage is also possible in instances where foreign exchange rates lead to pricing discrepancies, however small. Whenever an asset is traded in multiple markets, its prices may temporarily fall out of sync. It’s when this price difference exists that pure arbitrage becomes possible.
Merger arbitrage
Is a type of arbitrage related to merging entities, such as two publicly traded businesses. Generally speaking, a merger consists of two parties: the acquiring company and its target.
If the target company is a publicly traded entity, then the acquiring company must purchase the outstanding share of said company. In most cases, this is at a premium to what the stock is trading for at the time of the announcement, leading to a profit for shareholders. As the deal becomes public, traders looking to profit from it purchase the target company’s stock—driving it closer to the announced deal price. The target company’s price rarely matches the deal price but often trades at a slight discount. This is due to the risk that the deal may fall through or fail. Deals can fail for several reasons, including changing market conditions or a refusal of the deal by regulatory bodies, such as the Federal Trade Commission (FTC) or the Department of Justice (DOJ). In its most basic form, merger arbitrage involves investors purchasing shares of the target company at its discounted price, then profiting once the deal goes through. Yet, there are other forms of merger arbitrage. For example, an investor who believes a deal may fall through or fail might choose to short shares of the target company’s stock.
Convertible arbitrage
Is a form of arbitrage related to convertible bonds, also called convertible notes or convertible debt. A convertible bond is, at its heart, just like any other bond: It’s a form of corporate debt that yields interest payments to the bondholder.
The primary difference between a convertible bond and a traditional bond is that, with a convertible bond, the bondholder can convert it into shares of the underlying company later, often at a discounted rate. Companies issue convertible bonds because doing so allows them to offer lower interest payments. Investors who engage in convertible arbitrage seek to take advantage of the difference between the bond’s conversion price and the current price of the underlying company’s shares. This is typically achieved by taking simultaneous positions—long and short—in the convertible note and underlying company shares. Which positions the investor takes and the ratio of buys and sells depends on whether the investor believes the bond to be priced. In cases where the bond is cheap, they usually take a short position on the stock and a long position on the bond.
Global macro
Is a form of arbitrage related to convertible bonds, also called convertible notes or convertible debt. A convertible bond is, at its heart, just like any other bond: It’s a form of corporate debt that yields interest payments to the bondholder.
This strategy involves analyzing macroeconomic factors such as interest rates, political events, and economic policies to make investment decisions. Global macro investors take positions in currencies, bonds, commodities, and stocks to benefit from changes in economic conditions. Although global macro and arbitrage are related, they differ in terms of their focus and the methods used to achieve their investment objectives.
Arbtrust Venture LLC is a Company based in Florida. Any prospective investors that wish to subscribe units of the Arbtrust Venture LLC operations should contact us through the contact form. This website is not an offer to buy or sell, nor is it a solicitation of an offer to buy or sell, the Units or any other security or to participate in any advisory services or trading strategy. Any offering or solicitation will be made only to certain qualified investors who are “accredited investors” as defined under Regulation D of the Securities Act, and any investments by U.S. persons will only be permitted to potential investors who demonstrate that status. Investors in the Shares must have the financial ability, sophistication, experience, and willingness to bear the risks of such investment. Arbtrust Venture LLC (the “fund”) operates pursuant to SEC rule 506(b) of regulation D. The membership interests of the fund have not been registered under the securities act of 1933 (the “securities act”), or the securities laws of any state. Arbtrust Venture performs arbitrage in the negotiation of digital assets, the simultaneous buy and sell of a specific asset taking advantage of the fluctuation of the price of the same asset. Historical returns, economic, market, or other performance do not indicate future results. Any potential investments made in the company involve risk. Potential investors should carefully consider the long-term nature of an investment in the Units prior to making an investment decision. Units of the company are not insured by the FDIC. TO REGISTER FOR ACCESS TO INVESTMENT MATERIALS. THIS CONFIDENTIAL DOCUMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR ADVISE, IT IS FOR INFORMATIONAL PURPOSES ONLY, WITH NO WARRANTY MADE EXPRESS OR IMPLIED TO ITS ACCURACY. ACCREDITED INVESTORS ONLY.
Arbtrust© 2024 All Rights Reserved.
