A beginner's doubt on arbitrage in options

[tonyrajeshw]

Dear traderji members,

I know about arbitrage. But I want to know whether is there any possibility that we can do arbitrage in 1 lot of mini nifty. Because , even for farther month options in mini nifty there is not even a single option type in mini nifty whose best bidder value is greater than best seller option of nifty of same type. Similar thing holds up for seller in mini nifty and bidder in nifty. So, my point is whether are there any people who are doing arbitrage with single lot of mini nifty. I expect replies from experienced members..Thanks for it in advance.

 

[OptionsAce]

Tonyrajeshw,

Arbitrage would be capturing the value difference, which essentially means you would need 'atleast' two lots. And though not very liquid, nifty options are fairly efficient - which means you will not have many opportunity-windows open.

It's easy to make 300-400 bucks between two lots by using arbitrage theory - not more than that. And the returns aren't exactly lucrative, considering the price you'd pay for the lot.

Unless you have high-frequency trading systems that monitor the markets on a tick-by-tick basis, you should look at directional trading, and not arbitrage.

If you insist on using arbitrage methods, better move to lesser liquid equity options, not nifty.

 

[tonyrajeshw]

Dear OptionsAce,

Thanks for ur reply. Actually , I am not interested in arbitrage. I wanted to trade mini nifty options. Since mini nifty options are less liquid when compared to nifty options, I felt that if arbitrage opportunity exists then I can close my positions without any problem of liquidity by paying a higher premium than nifty options.

 

[OptionsAce]

Dear OptionsAce,

Thanks for ur reply. Actually , I am not interested in arbitrage. I wanted to trade mini nifty options. Since mini nifty options are less liquid when compared to nifty options, I felt that if arbitrage opportunity exists then I can close my positions without any problem of liquidity by paying a higher premium than nifty options.

Hmm....

You'll still need to trade in atleast two lots. All the best.
I see better arbit opportunities in different series in Nifty. Do check for that.

Cheers,
OptionsAce