Hi,

Looking at the current orderbook:

It seems like one can buy 2 lots of futures at 142.05 and immediately sell at 142.15 with a .10 x 7000 = Rs 700 profit. Is this correct ?

Hi,

Looking at the current orderbook:

It seems like one can buy 2 lots of futures at 142.05 and immediately sell at 142.15 with a .10 x 7000 = Rs 700 profit. Is this correct ?

No this isn’t how it works. The bid prices are the prices at which buyers are available. The offer prices are the prices at which sellers are available.

If you wish to buy 2 lots, then you’ll get it at the best offer price which is 142.15. If you wish to sell 2 lots, then you’ll get it at the best bid price which is 142.05.

If you buy and then sell immediately, you’ll lose 0.15 paisa. This is the bid-ask spread a trader has to pay to get into the trade.

What are the ways one can earn this bid-ask spread ? Traditionally a market maker can but can you explain how does that work ?

Thanks @BharatW: Are there market makers in India ? Can you please explain the basic steps if one starts with no inventory. Say in the above example, a market maker quotes bid-ask and one of them gets taken. How does the market maker now deliver if he has no inventory ?