Arbitrage Trading Program - ATP

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 I use software to make arbitrage trades?

    Understand the meaning of arbitrage trading, and learn how traders employ software programs to detect arbitrage trade opportunities. Read Answer >>
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    Learn what risk arbitrage trading is and how this type of arbitrage trading opportunity is available to individual retail ... Read Answer >>
  3. What skills should I acquire to take advantage of arbitrage trading?

    Understand what arbitrage trading involves and what the necessary skill set is that a trader must develop in order to master ... Read Answer >>
  4. What models should I use to make arbitrage trades?

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  5. What is the difference between arbitrage and speculation?

    Arbitrage and speculation are very different strategies. Arbitrage involves the simultaneous buying and selling of an asset ... Read Answer >>
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    Dive into two very important financial concepts: arbitrage and hedging. See how each of these strategies can play a role ... Read Answer >>
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