Hey,
I am new at this, but I have found an arbitrage opportunity and I want help with it.
There is a share trading at 100 on NSE in cash market and the same share is trading at 101.30 in the Futures market.
How do I set up the arbitrage and benefit from this opportunity?
Kindly help urgently.
thanx
D. R. Chopra
Check the futures lot size. Say the lot size is 1000. You have to buy in cash 1000 shares and short the futures one lot. This means you need to take delivery of the shares and hold them till expiry. The difference is only 1.3%. Now take the cost into account.
You have to calculate the cost for four individual transaction
1. Buying 1000 shares in delivery
1. Buying one lot of futures
3. Selling 1000 shares from Demat on expiry day
4. Selling one lot futures on expiry day
Then there may be slippages. When you want to buy don't look at LTP look at the best sell available. Similarly when you want to sell/short look at best buy available. After you make provision for slippages and taking all the cost into account if you still think an arbitrage opp exists then calculate the return on the capital blocked (buy of 1000 shares + cash needed for one lot futures if your broker does not allow margin against the shares). If it is still worthwhile then you can go ahead with it.
