relationship trading

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Basis Trading

A form of arbitrage in which one buys an investment vehicle while selling or selling short a similar investment vehicle. For example, one may buy a stock while selling a futures contract on the same stock. Alternatively, one may buy a put while selling a put on the same underlying asset for a different strike price. Basis trading is advantageous when the trader believes there is price inefficiency between the two investment vehicles such that the gain on one will offset the loss on the other. For instance, in the futures contract example, basis trading can be advantageous if the price of the stock plus the cost of carry is less than the price of the futures contract that the investor sells. It is also called relationship trading.

relationship trading

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He summarized, "This model creates a win-win situation and is helping the market move back to its roots - relationship trading with known entities as opposed to dark pools and mirage liquidity sources.
Well the principal at the new terminal will likely be IPG and Morgan Stanley, they have an active relationship trading gasoline in the Red Sea," a Middle East based trader said.

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