Is it possible to take advantage of arbitrage between th Big S&P, and E mini S&P futures contracts. I've been noticing that in the past few days there's been significant difference in pricing between the 2 contracts, about 10 points.
2007-03-27 13:34:14 · 3 answers · asked by gfierros1 1 in Business & Finance ➔ Investing
I doubt it. The mini-S&P is exactly 1/5th the size of the regular S&P contract. We are talking about one of the most actively traded contracts in the world that is being traded by thousands of traders, hedge funds, speculators, etc. The differences in prices you are observing are likely to be explainable. Typical explanations: bad tick data, non-contemporanous trading observations.
2007-03-27 17:47:18 · answer #1 · answered by gls_merch 5 · 0⤊ 0⤋
You check Index times e^krf x time to expiry. If this is greater than the future price you sell the future and if it is less than the future price you buy the future. Do this for both the index mentioned and you can make an arbitrage profit on mispricing of the futures. Krf is the risk free rate.
2007-03-27 19:05:50 · answer #2 · answered by Mathew C 5 · 0⤊ 0⤋
Any sort of extremely liquid derivative is going to have computers monitoring the prices that are capable of recognizing an arbitrage situation faster than you, in addition to being able to execute the trades quicker than you can enter them.
Best of luck.
2007-03-27 18:59:23 · answer #3 · answered by Anonymous · 0⤊ 0⤋