How to arbitrage?


#1

This must have been answered before somewhere on this forum. I happened to notice today that gap between spot and futures for nifty was usually lower than expected. Is there a scope for arbitrage here? If so, how this could be done practically.
P.S: I am just curious, although I think it might require quite an amount of trading so it might not be worth it.


#2

I think you would have to do arbitrage with 75 qty of Niftybees and Nifty future (my guess)

If gap is high today, then buy Niftybees N, sell Nifty fut N+20

tomorrow gap closes, then sell Niftybees M, buy Nifty fut M+10

Profit = 20-10 = 10 pts


#3

Its not 75 qty.

Arbitrage QTY = (NIFTY INDEX VALUE * 75) / NIFTYBEES ETF VALUE.

In theory, the arbitrage strategy using nifty futures and niftybees etf looks good. But in reality the strategy is not efficient. because of the lesser liquidity and wider spread of niftybees in comparison to The Nifty Futures.