The term "program trading" applies to any type of strategy that uses quantitative analysis to identify mispricings of instruments such as stocks, bonds, indices or derivatives. The aim is to profit from exploiting these by trading in a highly automated, systematic fashion, writes Anuj Gangahar.

An example is index arbitrage, which involves selling futures on an index while simultaneously buying back a basket of its component stocks when the index is worth more than its constituent parts. The relationship between the value of an index and its constituents is known as the basis and can be positive or negative.