Why is there so much difference between spot and fut price for escorts?

Wow, looks like a arbitrage opportunity. :sweat_smile: :sweat_smile:

Edit: I think some buyback is in place for escorts. Not sure.

How does buyback affect option prices?

For arbitrage you need Escorts shares to sell! so not possible.

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For that futures should trade at a premium compared to spot😅

If it was vice versa, then arbitrage would be possible.

By the way, nice observation😉

No arbitrage exists in the market, at least not this big. If there’s any arbitrage possible, the algos remove it within moments. I don’t know the contents of the deal but most likely the price of spot and futures would be adjusted.

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Technically, can you not borrow via SLB and do the same by selling in cash and going long in FUT?

How can Retail people do it ? is there any Platform which support SLB?

@nithin @Tradingqna @ShubhS9 @Karthik

In this case, can we buy Futures and buy put options (or sell call options)? May be if we get the right strike with right Premium, we will be able to make use of arbitrage opportunity.

However, I have a question here: What will happen if I execute this trade and there is no liquidity of the option I traded? Will the Futures and options get cancelled and everything will be settled in cash? Or will there be any margin/cash required to take delivery?

You can. We currently offer Securities Lending and Borrowing through the offline route. If you wish to enable SLB for your account, please create a ticket here. You can learn more on SLB here.


Can you throw some light on why there is difference and how are fut and opt prices adjusted later and also are there any margin calls when these kind of adjustments are done?

Arbitrage is always possible…

Sell the Costlier, but the cheaper… if the prices are gonna converge.

Sell the stock (if it’s costlier), buy the future (if it’s cheaper)… wait for expiration.

I admit my understanding might be off base, pls correct me if I’m wrong.

EDIT: crap, shorting stocks not allowed in India???

You can’t short stocks and take it home with most brokers.

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Can anyone please tell if my understanding is correct and answer my question regarding the delivery of stocks?

You can refer the Zerodha Support in following title or link :

What is Zerodha’s policy on the physical settlement of equity derivatives on expiry?

" Spread and covered contracts.

If you hold multiple F&O positions in the same stock and if the overall position in the account results in an equal quantity of both, give and take delivery, they are netted off¹. So for example an equal number of lots of long futures (take delivery) and short ITM calls (give delivery) on expiry will lead to no delivery obligations as both positions are netted off.

While the net delivery obligation because of the various opposing F&O positions in the same stock could be zero, the delivery margins are still charged on each F&O position separately. So if you had an equal quantity of short futures and long puts, the delivery margin would be asked separately for both the futures and puts contracts. The delivery margin exists because you can exit one of the positions that can, in turn, lead to a delivery obligation."

Regarding liquidity, I don’t think Escorts Ltd stock option have well liquidity in most of the months. Short covering making the stock price higher than Future price- It may be some investors don’t allow spot price to fall to far value of future price even though the future price is derived from Spot price. However, we can expect that spot price will come down from current price - refer last two month rallies ended down from Dec 2021, and current spot price is lower than last month close.

Thank you for the link and explanation! It is now clear.

Did you get the answer?

Why escort future is trading at discount?

@ShubhS9 @jashjacob @ravish_sn

assuming this was the reason - Everything You Need to Know About the Escorts Limited Open Offer

As mentioned in other reply, it may be due to the open offer. However I did not try out the trade because of liquidity issues and the bid-ask spread.

It’s because of the cost of carry. The traders have to pay this cost if they hold the physical stock for a specified period of time. Many find it a good arbitrage opportunity.

The difference between these two prices is called the cost of carry. The future price is equal to the spot price plus the cost of carry.