Arbitrage Trading Program - ATP

AAA

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."

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Cash-And-Carry-Arbitrage

    A combination of a long position in an asset such as a stock ...
  2. Commodity Trader

    Unlike stock traders, who buy and sell equities, commodity traders ...
  3. Dividend Arbitrage

    An options trading strategy that involves purchasing put options ...
  4. Arbitrage

    The simultaneous purchase and sale of an asset in order to profit ...
  5. Market Arbitrage

    Purchasing and selling the same security at the same time in ...
  6. Efficient Market Hypothesis - EMH

    An investment theory that states it is impossible to "beat the ...
RELATED FAQS
  1. How does a company decide when it is going to split its stock?

    There are no set guidelines or requirements that determine when a company will split its stock. Often, companies that see ... Read Full Answer >>
  2. How is fair value calculated in the futures market?

    The fair value is the theoretical calculation of how a futures stock index contract should be valued considering the current ... Read Full Answer >>
  3. What are the major types of insurance policies that insurance companies will offer?

    The principal commodities used in producing chemicals are oil, natural gas, coal and a wide variety of metals and minerals. ... Read Full Answer >>
  4. How valuable is the forward rate as an overall economic indicator?

    Any given forward rate is theoretically equal to its corresponding spot rate plus future expectations. Many investors and ... Read Full Answer >>
  5. What is the difference between speculation and hedging?

    Speculators and hedgers are different terms that describe traders and investors. Speculation involves trying to make a profit ... Read Full Answer >>
  6. What securities can I use to engage in speculation of an asset while limiting my ...

    If you want to engage in speculation of an asset while limiting your costs, use a derivative security. Since a derivative ... Read Full Answer >>
Related Articles
  1. Trading Systems & Software

    The Pros And Cons Of Automated Trading Systems

    Automated trading systems minimize emotions, allow for faster order entry, lead to greater consistency and resolve pilot-error problems.
  2. Options & Futures

    Trading The Odds With Arbitrage

    Profiting from arbitrage is not only for market makers - retail traders can find opportunity in risk arbitrage.
  3. Active Trading Fundamentals

    The Power Of Program Trades

    Learn how programs make up a significant portion of the volume traded each day.
  4. Insurance

    Futures Fundamentals

    For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work and why investors use them.
  5. Retirement

    Electronic Trading Tutorial

    Learn about the systems that run the market. Topics include market makers, specialists, SuperDOT, ECNs, SOES, Level I, II, and III Access, and more.
  6. Investing Basics

    Understanding Non-Deliverable Forward (NDF)

    A foreign exchange hedging strategy where the parties agree to settle the profit or loss in a foreign currency futures contract before the expiration date.
  7. Options & Futures

    How & Why Interest Rates Affect Options

    The Fed is expected to change interest rates soon. We explain how a change in interest rates impacts option valuations.
  8. Investing Basics

    Explaining Currency Swaps

    A swap that involves the exchange of principal and interest in one currency for the same in another currency.
  9. Investing

    The Risks & Rewards of Penny Stocks

    Penny stocks can make you a lot of money in a short period of time, but this is a very dangerous game that almost always will leads to losses.
  10. Investing

    How The NYSE Makes Money

    We examine how the New York Stock Exchange, the leading US stock exchange, makes money.

You May Also Like

Hot Definitions
  1. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  2. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  5. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  6. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
Trading Center