Query?

N

NOMINDTR

Well-Known Member
#2
#2
Arbitrage is making profit buy taking contra positions in Cash and Derivatives market. What you wrote is correct.

You can close your positions on expiry if not earlier before.

richlook said:
Suppose during expiry Vsnl cash is Rs 320 and Vsnl future is 321. this will be a loss when i square the postions in cash and futures.

In this Case how to do arbitrage to make the profit . Clarify me with clear cut examples.
Click to expand...
As far the basic concept concerns, underlying of a derivative contract will converge with the underlying on expiry.

In this case, VSNL cash market price and VSNL future price will be same on expiry. If there is a difference, people who do arbitrage come into scene and they make profit using the difference in cash and derivative markets.

So the activity of arbitrage itself is evident that the future price and spot price would be the same at the point of expiry.

Hope this helps.
 
IAtma

IAtma

Well-Known Member
#3
#3
I do not know the lot size of vsnl. I assume it 1000 shares.

bought 1000 shares @ 337.90 = 337900
sell future 1000 shares @ 346.65 =346650


at squaring off the position........

sold 1000 shares @ 321 =321000.

loss on cash 337900-321000= 16900.

bought future 1000 shares @ 320= 320000.

profit on future 346650-320000= 26650

Net profit = profit on future - loss on cash = 26650-16900= 9750.



richlook said:
hi,
Can experts please clarify my douts in Arbitage between Cash and futures market.
For eg today
Vsnl July Cashmarket is Rs 337.90
Vsnl July future market is Rs 346.65

Difference between (Future - Cash)(346.65 - 337.90) = Rs 8.75
Now iam buying Vsnl in Cash market and simaltaneously selling Vsnl future Contracts.
Next what to do .i have to square of both the postions in Cash and future markets. or i have to leave it to expiry to book the profits.
Suppose during expiry Vsnl cash is Rs 320 and Vsnl future is 321. this will be a loss when i square the postions in cash and futures.

In this Case how to do arbitrage to make the profit . Clarify me with clear cut examples.
Click to expand...
 
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