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#1
24th August 2006, 12:36 AM
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Arbitrage on nifty futures
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 
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#2
24th August 2006, 09:19 AM
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Re: Arbitrage on nifty futures
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).
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#3
24th August 2006, 09:39 AM
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Re: Arbitrage on nifty futures
Quote:
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?
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#4
24th August 2006, 11:18 AM
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Re: Arbitrage on nifty futures
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.
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#5
24th August 2006, 11:25 AM
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Re: Arbitrage on nifty futures
Quote:
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#6
24th August 2006, 12:27 PM
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Re: Arbitrage on nifty futures
Yes, once the market direction reverses, those on the wrong side start to cover their positions, and the futures converge.
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#9
1st September 2006, 10:40 AM
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Re: Arbitrage on nifty futures
Quote:
Good difference. Im still a novice. Pls guide.
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