6 Hedge Fund Strategies to Put in Your Back Pocket

Arbitrage

Tim Cook holding chartPrice arbitrage is considered by some to be one of the safest strategies of all, because it does not involve any anticipation or forecasting of future events. Arbitrage is basically obtaining profits from a price difference in two different markets.

Let’s say a hedge fund buys shares of a particular company in the U.S. for $100, and in the meantime, the share price of the same company amounts to $101 (converted USD) in Europe. In this way, by re-selling shares bought in the U.S in Europe, the hedge sees a return of $1 per share.

However, the computerization of trading has reduced price arbitrage opportunities, but currency and fixed income arbitrage opportunities still exist.