Strategy lab
Every strategy from 151 Trading Strategies and all 101 Formulaic Alphas as formulas you can edit and backtest on ten years of daily stocks, ETFs, futures, forex and crypto data. Free, in your browser.
6.4IndexesReference
Intraday arbitrage between index ETFs
Two ETFs on the same index should trade at the same price. When one’s bid exceeds the other’s ask by a threshold, sell one and buy the other.
Why there is no chart
Intraday quotes for two ETFs on the same index.
The lab runs on daily prices for stocks, ETFs, indexes, futures, currencies, crypto and Treasury yields. This strategy from 151 Trading Strategies depends on data outside that set, so it is explained and formalised here rather than backtested.
Hypothetical backtests on daily closes with no slippage unless you add costs. Survivorship bias applies: the stock list is today’s large caps. For learning, not investment advice. Data: Yahoo Finance via yfinance.
- Source
- 151 Trading Strategies
- Section
- 6.4 · Indexes
- Asset class
- Indexes
- In the lab
- Explained, not backtested
Intraday arbitrage between index ETFs (6.4)
Two ETFs on the same index should trade at the same price. When one’s bid exceeds the other’s ask by a threshold, sell one and buy the other.
Key equation
Data it needs
Intraday quotes for two ETFs on the same index.
More in Indexes
- 6.2 Cash-and-carry arbitrage
- 6.3 Dispersion trading
- 6.3.1 Dispersion trading – subset portfolio
- 6.5 Index volatility targeting
Source: Kakushadze, Z. and Serur, J. A. (2018). 151 Trading Strategies. Palgrave Macmillan. SSRN 3247865. Summaries are our own.