Arbitrage on nifty futures

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swagat86

Active Member
#1
#1
Hi Frnds, im still not a derivatives trader. But i was just curious abt Arbitrage positions on Nifty Futures of two different Expiry Dates. Say as of today

NIFTY 31-Aug-2006 3,337.00
NIFTY 28-Sep-2006 3,326.00
NIFTY 26-Oct-2006 3,305.00

Right. So i Buy September Futures and Sell OCt Futures. By the time September Futures will reach Expiry the September and Oct will be quite close to to each other. IS this Feasible? Seniors pls help.


Thnsk
 
I

ivanboesky

Active Member
#2
#2
Nope. You will sell the Sep futures and buy the Oct futures, since the Sep futures are overpriced as compared to the Oct futures. Adjust for any potential dividends however (even though the probability is very low).
 
S

swagat86

Active Member
#3
#3
ivanboesky said:
Nope. You will sell the Sep futures and buy the Oct futures, since the Sep futures are overpriced as compared to the Oct futures. Adjust for any potential dividends however (even though the probability is very low).
Click to expand...

YA i agree. ITs buy the low sell the high. But my frnd can u pls explain what is adjustment potential dividends? As i asked before is this feasable?
 
I

ivanboesky

Active Member
#4
#4
It is feasible to do the arbitrage with a view of the two converging, or better still the October futures going at a premium to the Sep futures.
There are quite a few stocks going ex-dividend in Sep. Not sure about October. Check the amount of dividends of the Nifty stocks and adjust the Nifty value accordingly.
Anyway, your strategy is safe. Not too many things can go wrong. But if the Sep-Oct futures dont converge before the Sep futures expire, you may have to carry your positions forward.
 
S

swagat86

Active Member
#5
#5
ivanboesky said:
It is feasible to do the arbitrage with a view of the two converging, or better still the October futures going at a premium to the Sep futures.
There are quite a few stocks going ex-dividend in Sep. Not sure about October. Check the amount of dividends of the Nifty stocks and adjust the Nifty value accordingly.
Anyway, your strategy is safe. Not too many things can go wrong. But if the Sep-Oct futures dont converge before the Sep futures expire, you may have to carry your positions forward.
Click to expand...
Thanks ivanboesky for that instant reply. One more Question if u dont mind. i think ur an Experienced Guy. In ur experience has this happened before expiry whp futures havent converged??? Not much idea. Right now im watching the Nifty Sep and August intraday chart it has touched twice or thrice. Is it correct.
 
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hsarora47

New Member
#8
#8
Why not start a daily topic on arbitrage.
let each ome of us spend some time and post our findings where good arbitarge opportunities are there.
 
S

swagat86

Active Member
#9
#9
hsarora47 said:
Why not start a daily topic on arbitrage.
let each ome of us spend some time and post our findings where good arbitarge opportunities are there.
Click to expand...
a good idea. Watch out for century textile Sep and OCt futures.
Good difference. Im still a novice. Pls guide.
 
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