hi

thnks for making me a part of this elite group.

I have some doubts regarding arbitrage
1) can we do intraday arbitrage,like reverse arbitrage, if yes then it is compulsory that we should have equilvalent amount of shares in our demat account before doing so.

2)
xyz at Rs104 in spot market
xyz at Rs 100 in futures

i dont hold any shares of xyz.now i will buy in futures and at the same time sell in spot. then can we carry short postions to the next day in spot market. is this the way to do ?


pls guide me

no u cannot carry the position to the next day if u donot have shares in ur A/c. u will have 2 square off the position on the same day. if the spread expands u can loose money.

thnks for replying
couple of more doubts
1)what i understood is that one can do reverse arbitrage even if he doesn't have shares in his demat account bt then he will have to square it off bfore 3.30p.m right.

2)u said that if the spread increases i may lose money-how? could you pls explain in detail what is spread and how will i lose money

hi harry
yes u can take up a reverse arbitrage position provided u squre it off bfore 3.30 if u donot have shares in ur a/c.
a spread is when u simultaneously buy one position and offset it by selling another, as in ur eg. if u buy xyz @ 100 frm the futures mkt and sell xyz @104 in the cash mkt. the diff. between the two is 4 rs. now if this spread reduces to 2 rs. before the close ie. assuming xyz is still quoting at100 in the futures mkt. but is available for 102 in the cash mkt. u can make a profit of 2 rs. by offsetting ur trade. conversly, if xyz is trading@ 100 in the futures mkt but it isquoting @ 108 in the cash mkt, u wd still have 2 reverse the position bfore close but now u wd suffer a loss of 4 rs.