GOLD Spread : Less risk Good profit

TraderPRO

Well-Known Member
#1
If you can afford to carry forward, buy GoldMega 1 lot and sell 10 lots of GoldMini.
Assured return of min 40k.

Exit when your profit targets achieve.

Risk: max 5-10k, reward 40-45k
 

myamit

Well-Known Member
#2
Hello,

Thank you for sharing such a nice arbitrage opportunity.

Could you describe logic for such a difference in Gold & GoldM prices?

Regards,
 

Mr.G

Well-Known Member
#3
Gold is not cash settled. And GOLD and GOLDM have different settlement dates. The only date where it is viable is 5 OCT contracts. Now why there is a difference of rs.500 there? The difference is too small for full payment as you will be making only Rs.250 per leg. That is 0.8% percent on full margin paid. That means you will be blocking your money for 3 months just to make 0.8%. Money is better deployed else where. EVEN FD GIVES BETTER RETURN THAN THIS! Even tax paid on transaction is more than the profit!
Now if you say you will take leverage. The interest on leverage alone will kill you and send you into negative territory. Understand this very clearly. Arbitrage is not possible for retail traders or investors. Computer algorithms come in and eat up all arbitrage opportunities in seconds.
 
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#4
Gold is not cash settled. And GOLD and GOLDM have different settlement dates. The only date where it is viable is 5 OCT contracts. Now why there is a difference of rs.500 there? The difference is too small for full payment as you will be making only Rs.250 per leg. That is 0.8% percent on full margin paid. That means you will be blocking your money for 3 months just to make 0.8%. Money is better deployed else where. EVEN FD GIVES BETTER RETURN THAN THIS! Even tax paid on transaction is more than the profit!
Now if you say you will take leverage. The interest on leverage alone will kill you and send you into negative territory. Understand this very clearly. Arbitrage is not possible for retail traders or investors. Computer algorithms come in and eat up all arbitrage opportunities in seconds.
All I’ve ever asked of my clients is for them to follow my recommendations as they would the word of God.

hello, Mr G . u r very frank man:p:p:p
 

myamit

Well-Known Member
#5
Gold is not cash settled. And GOLD and GOLDM have different settlement dates. The only date where it is viable is 5 OCT contracts. Now why there is a difference of rs.500 there? The difference is too small for full payment as you will be making only Rs.250 per leg. That is 0.8% percent on full margin paid. That means you will be blocking your money for 3 months just to make 0.8%. Money is better deployed else where. EVEN FD GIVES BETTER RETURN THAN THIS! Even tax paid on transaction is more than the profit!
Now if you say you will take leverage. The interest on leverage alone will kill you and send you into negative territory. Understand this very clearly. Arbitrage is not possible for retail traders or investors. Computer algorithms come in and eat up all arbitrage opportunities in seconds.
Mr. G,

Thank you for taking time out to explain. However I don't think that you've understood this correctly.

GoldM & Gold both have same expiry i.e. 5-Oct

Margin to be paid for (sell 10 GoldM & buy 1 Gold) is Rs. 3,72,000

Difference is Rs. 500 (hence we can anticipate profits around 45K)

Time remaining to 5-Oct expiry is 15 days (Today is 17-Sep and Tendor period will start by 1-Oct)

Hence, simply maths says... by investing Rs. 372,000 (may be you wish to keep 10-20K for m2m if at all required)

So by investing 400K (upperside) you have opportunity to earn 45K. This is whopping 11% return (over 250% if annualized) in just 15 days.

LMK your thoughts.
 

Mr.G

Well-Known Member
#6
In arbitrage m2m is not needed as profit and loss are fixed in advance. I already gave you the scenario if you use margin. I did not notice the date, I am sorry for that. But the profit on the actual amount is still 0.08%,you will have to pay margin rate for the rest of the money you have taken to buy contract from your broker. i.e 372000- Full value of both contracts. Try and understand. ICharges such as brokerage, taxes, exchange charges. All negate any profit from it!f there was a profitable position here then big firms would have filed it in already.
 

myamit

Well-Known Member
#7
In arbitrage m2m is not needed as profit and loss are fixed in advance. I already gave you the scenario if you use margin. I did not notice the date, I am sorry for that. But the profit on the actual amount is still 0.08%,you will have to pay margin rate for the rest of the money you have taken to buy contract from your broker. i.e 372000- Full value of both contracts. Try and understand. ICharges such as brokerage, taxes, exchange charges. All negate any profit from it!f there was a profitable position here then big firms would have filed it in already.
When you trade with leverage, you do not have to pay any interest separately. It is actually included in price. As here both position in future, you're negating that component.

Also I do not understand why I need to pay 372000 - Full value of both contracts. What I've to pay (or get) is difference of spread between both the contracts. That's it.

Again for clarity sake, I'm not going to hold these positions till expiry. This is with a view that this price difference will narrow in coming days. Historically price difference between GoldM & Gold is about 50-70 Rs. only. Hence I'm hoping to achieve 500 - 50 = 450 Rs. on my investment of 37200 (for 10 GM base unit).
 

ashu1234

Well-Known Member
#8
In arbitrage m2m is not needed as profit and loss are fixed in advance. I already gave you the scenario if you use margin. I did not notice the date, I am sorry for that. But the profit on the actual amount is still 0.08%,you will have to pay margin rate for the rest of the money you have taken to buy contract from your broker. i.e 372000- Full value of both contracts. Try and understand. ICharges such as brokerage, taxes, exchange charges. All negate any profit from it!f there was a profitable position here then big firms would have filed it in already.
Hi,
Mr G, when you don't trade on commodities please don't put in wrong comments. The margin to trade gold is 3.7 lac that is right. If you buy one Big lot then you have to pay 3.7 lacs for m2m and if you want to short 10 gold mini against it, you don't have to pay extra margin for that, its called hedging against mini contract. So simply you can both buy and sell in the same margin, charges and brokerages are always there who asked for charge free return, 400-500 points making in gold is by all means is good trade even if you have to pay two side brokerage and taxes coz daily traders fight for 50-60 points of gold intraday. So if one is able to make 500 points over capital of 3.7 lacs in 15 days, calculate roi on your calci. 500 points matlab 50 hazaar hote hain!!!
So 500 points arbitrage is a good trade.
BTW I can make it happen in under 1 lac if I want, so please comment only if you actually have done any spread or arbitrage trade before.
 
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ashu1234

Well-Known Member
#9
In arbitrage m2m is not needed as profit and loss are fixed in advance. I already gave you the scenario if you use margin. I did not notice the date, I am sorry for that. But the profit on the actual amount is still 0.08%,you will have to pay margin rate for the rest of the money you have taken to buy contract from your broker. i.e 372000- Full value of both contracts. Try and understand. ICharges such as brokerage, taxes, exchange charges. All negate any profit from it!f there was a profitable position here then big firms would have filed it in already.
Really?
Do you know spread of gold some days before????
It was around 250.
http://www.traderji.com/metals/87569-gold-goldm-price-difference.html#post862253
If anybody has done spread on that time i.3 3-4 days back, he would have been paying 25000 as m2m. Do you have any idea of the cutoff date of Gold expiry??? its 30 sep not 5 oct. After 5 oct margin increases day by day. What will be the rate of gold at expiry i.e 30 sep???
Nobody can tell as real expiry rate is calculated very differently in case of Gold as price are cut off from international rates and are marked for delivery as Ex-ahemdabad rates. So don't put up crap that profit and loss of gold at expiry is decided in advance. Its a physical commodity and rate changes every day.
 

TraderPRO

Well-Known Member
#10
Friends,

The price difference between had been increasing for weeks now, from today, I observed it narrowing a bit and hence my suggestion.

Even 200 pts profit will be a good trade but, need patience. Also, be prepared for worst case as well. :)

Good luck Amit.
 
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