Ch.2 · Mutual Fund Structure Basics · medium
What is an Arbitrage Fund and how does it generate returns?
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EXPLANATION
An Arbitrage Fund exploits price differences between the cash (spot) market and futures market of the same stock. It simultaneously buys in the cash market and sells in the futures market, locking in a risk-free spread. It is taxed like an equity fund (minimum 65% in equity/arbitrage positions).
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