Arbitrage Trading Program - ATP

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DEFINITION of 'Arbitrage Trading Program - ATP'

A computer program used to place simultaneous orders for stock or commodities futures and the underlying stocks or commodities, usually for large volume, institutional trades. One order will be a long or short position on a futures contract, and the other order will be for the opposition position on the underlying. The ATP attempts to exploit price variations through a process called "index arbitrage."

BREAKING DOWN 'Arbitrage Trading Program - ATP'

Arbitrage trading programs are executed via program trading, or trading by automated computer systems that follow predetermined orders or algorithms. Program trades account for approximately 30% of daily volume on the New York Stock Exchange. These computerized trading systems are able to identify brief instances of mispricing, and place trades while there is an opportunity to profit from arbitrage.

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RELATED FAQS
  1. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  2. Is there a difference between financial spread betting and arbitrage?

    Financial spread betting is a type of speculation that involves a highly leveraged derivative product, whereas arbitrage ... Read Full Answer >>
  3. Why do companies enter into futures contracts?

    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>
  4. What does a futures contract cost?

    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>
  5. What are the goals of covered interest arbitrage?

    The goals of covered interest arbitrage include enabling investors to trade volatile currency pairs without risk as well ... Read Full Answer >>
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    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>

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