Saturday, 2 January 2016

How to Trade the Cash Futures Arbitrage- Money Classic Research

There are many different ways to minimize the risks involved in trading in Stock market. Some people devise the accurate strategies to trade effectively in the Stock market and others use the tips from the financial advisory on various segments of Stock market. In this article we will discuss a risk free method of trading, that is Cash Futures Arbitrage.
The Cash Futures arbitrage is practiced by buying and selling the same entity on cash and futures market. In the Cash market the trader or the investor pays for the current price of the stocks while buying and sell also at the current market price. In case of the futures trading the Stocks are bought and sold at a future date. The prices in context are also future prices. The trader is compelled to square up his position at the end of the contract.
In the Cash Futures Arbitrage generally the Stock is bought in the Cash market and sold in the Futures market. Generally the price of the futures market is more than that of cash market. Thus when the trader buys in the Cash market and sells in the future market, he will lock a definite profit. The difference between the futures price and cash market price is known as spread of the trade. Thus when the price fluctuates and when the gap or spread decreases the trader can square up his open positions and   can lock in the profits. The trader can also square up the positions when the contract expires. On the expiry the price of the cash market and the futures market converges and thus can lead a definite profit.

The above strategies along with many other strategies are use by the technical analysts in the advisory firm. Money Classic Research is one such advisory firm which provides accurate stock market tips in the form of equity tips or Intraday trading tips.

No comments:

Post a Comment