ANGELONE Futures trading at massive discount

F&O
1

I would request anyone of you to check and let me know why the futures of ANGELONE are trading at a discount.
Cash CMP = 1979
March FUT = 1914 (65 pts)
April FUT = 1841 (138 pts)
May FUT = 1789 (190 pts)
This is after today’s narrowing of discount. On Friday the gap between cash and future was 211 pts
Kindly guide why this is the case.

2

This is known as Backwardation but for stocks

I feel this is due to Market Sentiment - If investors expect the stock price to fall ; future contracts may trade at a discount to the current price.

3

What if one buys the stock and sells the future?

Is there an arbitrage opportunity?

4

No. You need to buy the Future and sell the stock through SLBM. Then you will make a profit

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5

But such a big discount?? Even now the gap between Cash price and May Futures is 8.7%

6

I have sold my existing holdings and bought 2 lots of ANGELONE at 8.7% discount.
I was going to hold on to it anyways…

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7

First, decide the model you believe in for Futures Pricing -

  1. Cash & Carry Model
  2. Expectancy Model

For Cash & Carry - Price in cost of carry interest rate, time to expiry, expected dividend. ANGELONE has in the past declared dividend twice in the month of March and April. Note that FUTUREs do not get dividend and hence the prices may be discounted.

For Expectancy Model - Price in the expected price of ANGELONE on expiry. Look for company reports where they might be talking about decline in profits, users, revenues, unexpected expense/payoffs.

I agree, it does seem to be behaving strangely, but the fact is it is probably pricing in these various expectations and information flows in the pricing model.

Screenshot 2025-03-06 at 3.37.55 PM

And with the information lag a retail investor has - capitalising real arbitrage opportunities is next to impossible. The Indian markets are quite efficient that way. So I will bet the pricing is correct and the visible discount is part of the future pricing model.

8

So, Biggies are expecting significant drop in price?

9

Last time I saw something like this was for IndiaBulls RealEstate and rest is history.

11

I have noticed a very high skew in ANGELONE ATM and have asked a question on the same. Can anyone enlighten me. Can a strategy be formed around this skew.

Thank you in advance. :pray:

12

What is history ? Stock still exists, was just renamed.