easy · Market Microstructure High-Frequency Dynamics & Latency Arbitrage
An authorized participant (AP) sees an ETF trading at 100.20 while the underlying basket of stocks has a NAV of 100.00.
To profit from this discrepancy, the AP should:
- Buy the ETF and sell the futures
- Short the ETF and wait for the NAV to rise
- Sell the basket and redeem ETF shares
- Buy the basket and create ETF shares
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