Today, I noticed an intriguing phenomenon in the options market. Throughout the trading day until 3 PM, the Nifty 20000CE (Call Option) and 19950CE were consistently trading at a discount. This piqued my curiosity, and I would appreciate it if someone could shed light on the underlying reasons for this unusual trend.
In response to this observation, I decided to take advantage of what appeared to be an arbitrage opportunity. I purchased the discounted call option and simultaneously sold the September futures contract, capitalizing on a 30-point arbitrage spread in the market. However, to my surprise, after 3 PM, the futures contract experienced an unexpected surge, surpassing the gains in the Nifty index itself, which ultimately led to my arbitrage position turning into a 10-point loss.
If there are any experienced individuals who can provide insights or logical explanations for this price behavior, I would greatly appreciate your input and analysis. Understanding the dynamics behind such market movements can be valuable for all traders and investors.