Investors with over a decade of experience, like Ms. Lu from Shanghai, are calling the recent arbitrage opportunity in the SDIC UBS Silver Futures (LOF) fund a rare occurrence, happening only once every few years. She noted that while daily profits from LOF fund arbitrage typically amount to just a few dozen yuan, the recent chance to earn hundreds per day is quite unusual.

Recently, some LOF funds have seen their secondary market trading prices deviate significantly from their net asset values. As of December 31, 2025, five equity LOF funds showed premium rates exceeding 3%. Among index LOF funds, the SDIC UBS Silver Futures (LOF) fund stood out with a premium rate of 10.64%.

LOF funds are unique open-ended funds that can be traded like stocks on an exchange or purchased and redeemed at net asset value through fund companies and agencies. This dual pricing mechanism creates arbitrage opportunities, specifically premium arbitrage and discount arbitrage.

Premium arbitrage occurs when a fund's market price exceeds its net asset value. Investors can purchase shares at the lower NAV, transfer them to the exchange, and sell them at the higher market price to capture the difference.

Conversely, discount arbitrage involves buying fund shares at a discount on the exchange when the market price is below the NAV, then redeeming them at the higher net asset value to profit from the spread.

Ms. Lu's experience began on December 17th when she noticed the SDIC UBS Silver Futures (LOF) fund had a premium exceeding 30%. Initially aiming for a small profit, she attempted a trade when the daily purchase limit was 100 yuan. The opportunity expanded significantly when the fund later increased its daily purchase limit to 500 yuan.

On the evening of December 18th, SDIC UBS Fund announced an adjustment to the large-amount purchase limit for its Silver Futures (LOF) fund to protect shareholder interests, raising the daily cap for Class A shares from 100 yuan to 500 yuan.

The fund truly gained widespread attention around December 24th, according to Ms. Lu, when the profit potential surged. On December 24th and 25th, her daily returns exceeded 300 yuan, followed by approximately 140 yuan on December 26th. By trading directly through her brokerage account instead of transferring shares, she achieved faster settlement and higher capital efficiency, accumulating about 1000 yuan in total profits by December 30th.

By December 31st, a total of 15 LOF funds exhibited premium rates over 3%. The Multi-Factor LOF led with a 22.07% premium, followed by Zhonghai Huiyu LOF at 21.18%, Changxin Lixin LOF at 21.06%, and China Merchants Zengrong LOF at 19.85%.

Another investor, Xiaotang, began her arbitrage activities in July 2024, initially focusing on the S&P Info Tech LOF and India Fund LOF. She described the returns as highly variable, ranging from just a few yuan to several dozen, with the recent phenomenon of earning hundreds per day being exceptional.

Xiaotang's trading records show that on December 23rd, she subscribed to 267 shares of the SDIC UBS Silver Futures (LOF) fund for 500 yuan. By December 25th, she sold them for 3.166 yuan per share, netting a profit of over 330 yuan after fees.

She emphasized that the T+2 settlement cycle for this fund means shares purchased one day are available for sale two days later. To manage risk from potential premium narrowing, she only acts when the premium exceeds 3%. Her profit scale has also fluctuated with changes in purchase limits, which were initially 100 yuan per account, later increased to 500 yuan, and recently reduced back to 100 yuan. She and her friends have been delighted with the opportunity to earn what feels like "easy money" daily.

Beyond single-account arbitrage, a more sophisticated method known as the "one-drags-six tractor" strategy has gained popularity on social media. This involves linking multiple sub-accounts—up to six in total for the Shenzhen market—under one main brokerage account, allowing simultaneous operations and potentially multiplying profits.

An investor named Liuli reported earning over 6000 yuan in seven months since assembling such a "tractor" setup in May 2025. With four accounts funded with 5000 yuan each (20,000 yuan total), she primarily targets LOF funds with premiums above 3%. By December 30th, her arbitrage profits totaled 6745.7 yuan, a 33.73% return, largely driven by the popular silver LOF fund.

A securities firm employee advised that most premium LOF funds impose strict daily purchase limits. Successful arbitrage requires a low-fee brokerage account, careful attention to holding periods, and pre-established links between on-exchange and off-exchange accounts. Settlement times vary: T+1 for funds holding A-shares or Hong Kong stocks, and T+2 for those with overseas holdings.

Currently, only a few brokerages support the streamlined "one-drags-six" account linking model. Most require investors to open three separate funding accounts or maintain accounts across different brokers, necessitating frequent switching.

According to Tian Lihui, Dean of the Institute of Financial Development at Nankai University, increased financial market volatility since 2025 has amplified price disparities. The dual trading nature of LOF funds makes them susceptible to deviations between NAV and market price due to sentiment and capital flows, creating arbitrage windows.

However, he warned that financial markets are unpredictable. An anticipated premium can quickly vanish or turn into a discount if market sentiment shifts after a subscription. Similarly, insufficient buy-side liquidity can lead to selling at prices lower than expected.

Kaiyuan Securities also highlighted risks in a December 28th commentary. The 2-3 day window for premium arbitrage and 3-4 days for discount arbitrage exposes investors to significant market fluctuations. Illiquid, niche LOF funds pose a risk of being unable to sell transferred shares or redeem them, forcing long-term holdings and missed opportunities. Furthermore, fund companies can curb arbitrage by imposing purchase limits or suspending subscriptions and redemptions.

Dean Tian recommended that investors first thoroughly understand and calculate all associated fees to ensure profits outweigh costs. Second, they must acknowledge the inherent price volatility risk during the multi-day settlement period. Finally, selecting large, liquid, and actively traded funds is crucial, especially for investors with significant capital, to mitigate liquidity risks.