How Do Standardized Contracts Facilitate Arbitrage Opportunities? ⎊ Path

How Do Standardized Contracts Facilitate Arbitrage Opportunities?

Standardization allows traders to easily compare the price of a futures contract with the price of its underlying asset across different markets. When the relationship between the two prices deviates from theoretical parity, arbitrage opportunities arise.

The ease of trading identical contracts facilitates quick execution of the arbitrage strategy.

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How Does the Concept of Volatility Smile or Skew Impact Arbitrage Strategies?

What Is the Difference between a Standardized and a Non-Standardized Derivatives Contract?

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Glossar

Standardized Contracts

Instrument ⎊ Derivative contracts, like futures or options, that have undergone a formal process of standardization regarding contract size, expiration cycles, and settlement procedures, typically traded on regulated exchanges.