Query regarding Nifty Futures Rollover Strategy

[ding1907]

Hello friends!

I am new to derivatives. I have recently read the following info in the net about Nifty Futures Rollover Strategy:

"One of the best arbitrage kinds of opportunities is available in the Indian capital markets owing to the mispricing of nifty futures. In developed markets, the cost-of-carry is usually linked closely with the prevalent interest rates and the minutest amount of mispricing is quickly captured by arbitrageurs. But in Indian markets, especially in the derivatives segment, the number of speculators and traders is far more than the number of arbitrageurs. So the difference in underlying and futures prices is far more dependent on the current sentiment in the market than on interest rates. Note that my observation is restricted to nifty and nifty futures. I’m not aware situation in individual stocks.

Cost of carry for far month contracts generally has been negative. If not that, even then far month contracts tend to trade a few points below the near month contracts. Ideally speaking, it should be opposite. One can hold long a lot of nifty worth two lakh rupees with a margin of thirty thousand and invest rest of the 1,70,000 in a nine percent fixed deposit. Every month, roll over the position to the next month’s contract effectively capturing 20-25 points. Do the roll-over on a day when market goes down a lot. That is when speculators are busy shorting and opportunities are more. This way one can make 6% in FD and 6% in roll-overs for a total of up to 12% excess returns over nifty with minimal risk. This performance will beat most of the mutual fund returns."

Is this strategy is SAFE and will it work for all market situations?

Is it better to rollover nifty till we get the reasonable gain meanwhile using arbitrage opportunities that come across due to miss pricing between different months contracts?

Are there any FOOLPROOF methods for a safe and study nifty futures trading?

Please share all nifty futures safe trading tips...

I believe lot many of you are masters in this derivative market, please guide me as i am new to derivatives and want to trade with minimum/nil risk.


Thanks in advance :clap:

 

[ding1907]

Thank you very much 'ashish' ji :clap:

 

[ding1907]

Hi,

Intrigued by the query so, could not resist replying it. Also, concur with Ashish's reply ...

There is nothing called Safe, foolproof, nil risk opportunities in trading world. It can only be promised by the tip providers & safe, foolproof, nil risk is applicable to them because of the subscribers guaranteed subscription money the tips providers will make

Trading is all about risk /reward probabilities stacked within the opportunity. You wear the Helmet (StopLoss) and ride the trading vehicle. Aim for reaching the destination (Target) while be prepared to get bruised (Losses) on the way due to any other external events beyond your control.

BTW, i've never seen an far month contract trading at discount to near months. I tend to short the far month contracts when my bias is bearish but, have never got an opp'ty to long an far month contract when my personal bias is bullish.

Regards,

A Good narration of the scenario. Today I too confirmed from my Broker, he also told that those opportunities very rarely come and one need to stick to monitors for grabbing.

Thanks a lot for time taking for replying a strange query.

:clap:

 

[drsambu123]

Hello friends!

I am new to derivatives. I have recently read the following info in the net about Nifty Futures Rollover Strategy:

"One of the best arbitrage kinds of opportunities is available in the Indian capital markets owing to the mispricing of nifty futures. In developed markets, the cost-of-carry is usually linked closely with the prevalent interest rates and the minutest amount of mispricing is quickly captured by arbitrageurs. But in Indian markets, especially in the derivatives segment, the number of speculators and traders is far more than the number of arbitrageurs. So the difference in underlying and futures prices is far more dependent on the current sentiment in the market than on interest rates. Note that my observation is restricted to nifty and nifty futures. Im not aware situation in individual stocks.



Cost of carry for far month contracts generally has been negative. If not that, even then far month contracts tend to trade a few points below the near month contracts. Ideally speaking, it should be opposite. One can hold long a lot of nifty worth two lakh rupees with a margin of thirty thousand and invest rest of the 1,70,000 in a nine percent fixed deposit. Every month, roll over the position to the next months contract effectively capturing 20-25 points. Do the roll-over on a day when market goes down a lot. That is when speculators are busy shorting and opportunities are more. This way one can make 6% in FD and 6% in roll-overs for a total of up to 12% excess returns over nifty with minimal risk. This performance will beat most of the mutual fund returns."

Is this strategy is SAFE and will it work for all market situations?

Is it better to rollover nifty till we get the reasonable gain meanwhile using arbitrage opportunities that come across due to miss pricing between different months contracts?

Are there any FOOLPROOF methods for a safe and study nifty futures trading?

Please share all nifty futures safe trading tips...

I believe lot many of you are masters in this derivative market, please guide me as i am new to derivatives and want to trade with minimum/nil risk.


Thanks in advance :clap:

Mr ding 1907
Excellent idea. Unfortunately not many discussions..
Are u doing this strategy regularly?
What is the result?
Can u pl share with us..

 

[knarendra]

pl.all of read it and give some idea about it.

My poind if view FD is giving more than 6%. @ 9%, 10% ( Senior citizen), 11% compant deposits as Tata motors, MRF etc...