Hello friends!
I am new to derivatives. I have recently read the following info in the net about Nifty Futures Rollover Strategy:
"One of the best arbitrage kinds of opportunities is available in the Indian capital markets owing to the mispricing of nifty futures. In developed markets, the cost-of-carry is usually linked closely with the prevalent interest rates and the minutest amount of mispricing is quickly captured by arbitrageurs. But in Indian markets, especially in the derivatives segment, the number of speculators and traders is far more than the number of arbitrageurs. So the difference in underlying and futures prices is far more dependent on the current sentiment in the market than on interest rates. Note that my observation is restricted to nifty and nifty futures. I’m not aware situation in individual stocks.
Cost of carry for far month contracts generally has been negative. If not that, even then far month contracts tend to trade a few points below the near month contracts. Ideally speaking, it should be opposite. One can hold long a lot of nifty worth two lakh rupees with a margin of thirty thousand and invest rest of the 1,70,000 in a nine percent fixed deposit. Every month, roll over the position to the next month’s contract effectively capturing 20-25 points. Do the roll-over on a day when market goes down a lot. That is when speculators are busy shorting and opportunities are more. This way one can make 6% in FD and 6% in roll-overs for a total of up to 12% excess returns over nifty with minimal risk. This performance will beat most of the mutual fund returns."
Is this strategy is SAFE and will it work for all market situations?
Is it better to rollover nifty till we get the reasonable gain meanwhile using arbitrage opportunities that come across due to miss pricing between different months contracts?
Are there any FOOLPROOF methods for a safe and study nifty futures trading?
Please share all nifty futures safe trading tips...
I believe lot many of you are masters in this derivative market, please guide me as i am new to derivatives and want to trade with minimum/nil risk.
Thanks in advance :clap:
I am new to derivatives. I have recently read the following info in the net about Nifty Futures Rollover Strategy:
"One of the best arbitrage kinds of opportunities is available in the Indian capital markets owing to the mispricing of nifty futures. In developed markets, the cost-of-carry is usually linked closely with the prevalent interest rates and the minutest amount of mispricing is quickly captured by arbitrageurs. But in Indian markets, especially in the derivatives segment, the number of speculators and traders is far more than the number of arbitrageurs. So the difference in underlying and futures prices is far more dependent on the current sentiment in the market than on interest rates. Note that my observation is restricted to nifty and nifty futures. I’m not aware situation in individual stocks.
Cost of carry for far month contracts generally has been negative. If not that, even then far month contracts tend to trade a few points below the near month contracts. Ideally speaking, it should be opposite. One can hold long a lot of nifty worth two lakh rupees with a margin of thirty thousand and invest rest of the 1,70,000 in a nine percent fixed deposit. Every month, roll over the position to the next month’s contract effectively capturing 20-25 points. Do the roll-over on a day when market goes down a lot. That is when speculators are busy shorting and opportunities are more. This way one can make 6% in FD and 6% in roll-overs for a total of up to 12% excess returns over nifty with minimal risk. This performance will beat most of the mutual fund returns."
Is this strategy is SAFE and will it work for all market situations?
Is it better to rollover nifty till we get the reasonable gain meanwhile using arbitrage opportunities that come across due to miss pricing between different months contracts?
Are there any FOOLPROOF methods for a safe and study nifty futures trading?
Please share all nifty futures safe trading tips...
I believe lot many of you are masters in this derivative market, please guide me as i am new to derivatives and want to trade with minimum/nil risk.
Thanks in advance :clap: