Arbitrage is a classic quant method to make money, yet I have not been able to figure out how to trade two different asset classes. For example, could you trade divergences between GLD and the futures Gold price? Or the same with ETF's that follow currencies vs the futures contract or the Forex currency pair? Everything I find seems to stay within one asset class. How do you trade between them?
Douglas Stridsberg
Hi Alex - welcome to QuantConnect! Firstly - it's absolutely possible to trade different asset classes in QuantConnect. You just need a broker that supports different asset classes, then it's simply a case of adding them to your algorithm.
Now for some thoughts on your post...
From my experience, people usually refer to arbitrage when you're trading two things that (for all intents and purposes) are identical against each other. An example of this would be the same stock on two different exchanges, or in foreign exchange where you trade a pair versus the same pair but built using different pairs.
The type of trades you're describing (ETFs vs. Futures, ETFs vs. Currencies, etc.) are probably best categorised as spread trades. The GLD ETF does not necessarily have to have the exact same price as a gold future (even the spot month one). The ETF is a share in a trust backed by physical gold whereas the future is a contract to buy an amount of gold at some point in the future. They should have a very similar price but are not identical assets.
Ryan Alex
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