Date:17.04.21
In Banks highest rate of is 7.40 % p.a. in HDFC Bank. That works out monthly 0.62%.
A SAFE monthly return higher than this is always welcome.
In stocks and its futures prices sometimes there will be difference which will give us opportunity for earning safe income.
This difference will wipeout on expiry day, future price and spot price will be same on expiry day of the Futures contract.
When there is positive difference, buy in equity, sell in futures market, same stock, to pocket this difference, this is called Arbitrage.
Go to this weblink: https://www.moneycontrol.com/stocks/fno/marketstats/arbitrage/futures-spot-near.html?classic=true
Here you will find arbitrage opportunities listed.
On 16.04.21 I can find ZEEL, spot price is Rs 193.95 and its near month(April expiry) futures price is Rs 197.50. There is difference of Rs 3.55. Lot size of ZEEL is 3000.
Hence, Sell ZEEL futures 3000 @ 197.50 = 5,92,500 and buy ZEEL 3000 shares at spot price @ 193.95 = 5,81,850. On expiry day there will be gain of 5,92,500 - 5,81,850 = Rs.10,650.
As you have shorted ZEEL, if price crashes there will be M2M profit. Likewise, if price gains there will be M2M loss. But loss will be compensated by rise in spot price. s. This will be adjusted on expiry day. Till the you have to bear this M2M loss. Keeping extra money (15%) (i.e. 3000 x 193.95 x 15/100 = 87,277.50) in ones trading account to cater to the initial M2M loss is the way. Remember any loss will be compensated on expiry day. M2M profit will be wipedout by spot price loss. So there will be no profit or loss by price fluctuations.
In Banks highest rate of is 7.40 % p.a. in HDFC Bank. That works out monthly 0.62%.
A SAFE monthly return higher than this is always welcome.
In stocks and its futures prices sometimes there will be difference which will give us opportunity for earning safe income.
This difference will wipeout on expiry day, future price and spot price will be same on expiry day of the Futures contract.
When there is positive difference, buy in equity, sell in futures market, same stock, to pocket this difference, this is called Arbitrage.
Go to this weblink: https://www.moneycontrol.com/stocks/fno/marketstats/arbitrage/futures-spot-near.html?classic=true
Here you will find arbitrage opportunities listed.
On 16.04.21 I can find ZEEL, spot price is Rs 193.95 and its near month(April expiry) futures price is Rs 197.50. There is difference of Rs 3.55. Lot size of ZEEL is 3000.
Hence, Sell ZEEL futures 3000 @ 197.50 = 5,92,500 and buy ZEEL 3000 shares at spot price @ 193.95 = 5,81,850. On expiry day there will be gain of 5,92,500 - 5,81,850 = Rs.10,650.
As you have shorted ZEEL, if price crashes there will be M2M profit. Likewise, if price gains there will be M2M loss. But loss will be compensated by rise in spot price. s. This will be adjusted on expiry day. Till the you have to bear this M2M loss. Keeping extra money (15%) (i.e. 3000 x 193.95 x 15/100 = 87,277.50) in ones trading account to cater to the initial M2M loss is the way. Remember any loss will be compensated on expiry day. M2M profit will be wipedout by spot price loss. So there will be no profit or loss by price fluctuations.