F&O Arbitrage (Near Month)

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This is not investment advice or financial advice of any sort. Do not do this. I do not endorse this and neither I, CryptoFacilities, nor any other entities listed in this site are responsible for any losses. This strategy only works when futures are trading at a premium and for the right type of contract: In this guide we don't want to deal with social loss risk, so use the FCA-regulated, London-based bitcoin derivatives exchange CryptoFacilities.

Sign up here to get started: CryptoFacilities offers Forwards contracts with no socialized losses. Making money arbitrage trading in futures market bitcoin futures can be extremely simple. Futures contracts typically trade at arbitrage trading in futures market premiumand all you have to do, starting with USD, is buy bitcoin at Spot price and sell futures of the same amount at premium price.

Then just wait until expiration to make your arb profit arbitrage trading in futures market bitcoin which you can then put in USD.

Whether it's a weekly, monthly, quarterly, or any futures contract, as long as it's in a premium, you lock in the sale price and earn the arbitrage profit. There's a lot of ins and outs which can get confusing in arbitrage trading. We won't go into the technicals of why futures contracts trade at a premium to spot price. You can read arbitrage trading in futures market full explanation here. If it's not of interest to you, all you need to know is that there's a tendency, the further out in time the futures contract expires, for the premium to spot to be higher and higher in nominal percentage terms.

The biggest problem is friction between steps along the way. There's fees, there's time you have to wait which can be eliminated by see-sawing, but then you're not maximizing your capital utilisationthere's slippage in orderbooks, etc.

We will go through all of these issues below. I find it best to show by example and then as issues are encountered we will review the concepts underlying. This example is to illustrate all the moving parts and risks that can occur in an arb play.

Another example will follow with a different scenario. You might be thinking, wtf? I thought arbitrage was guaranteed money? Well, in reality there's lots of services facilitating this process which demand fees.

Therefore, when you take that into account, you need to wait for the premiums on futures contracts to reach arbitrage trading in futures market sufficient level that it makes sense to go through this process. Let's still say it's a Monday and there's arbitrage trading in futures market contract expiring 2 weeks from now 11 days to be precise. These two examples are just a start to illustrate some of the key principles in executing REAL spot derivatives arbitrage trading.

Use the bitcoin arbitrage calculator below to see whether your planned arb setup can make money. Spot Price at Sell.

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The CFS facility shall be offered on all those underlying stocks on which derivative instruments are available for trading in BSE Derivatives segment. To facilitate this, CFS facility shall be available for trading across 3 contract months at any time, corresponding to the current, near and far monthly futures instruments on that underlying asset.

A trader shall be able to enter orders as one single order. Availability for trading — Orders shall be allowed only if instruments of both Equity and Derivatives segments are available for trading. Market Segment availability — Orders shall not be allowed in case either of Equity or Derivatives segments is closed.

Orders shall not be allowed in the pre-open session 9: Instrument suspension — Orders shall not be allowed if the instruments in either of Equity or Derivatives segment are suspended for trading. Member suspension — Orders shall not be allowed for a member if that member is suspended in either of the segments — Equity or Derivatives segment. Moreover, in case of any open positions in either of Equity or Derivatives segment instruments, the member shall be able to square up those open positions individually in those instruments.

Execution of 2 orders shall follow the existing price-time priority logic. On execution of a trade, this trade shall then be split into two more trades — one trade on the equity segment instrument and the other trade on futures instrument, both belonging to the same underlying stock asset.

All 3 trades shall have the same order ID as that of the original trade executed on that particular CFS. The "trade rate" of each of the three trades generated as described above, shall be determined as given below - Sr. Trade Rectification — client code modification shall be allowed on trades in the respective legs, i. However, client code modification shall not be allowed on the trade in the CFS. Original CFS - Not applicable. Equity segment instrument - Transaction fees shall be levied as per the rates applicable for the Equity segment from time to time.

Futures instrument - Transaction fees shall be levied as per the rates applicable for the Derivatives segment from time to time. Last Thursday of the month and where such a day is a holiday, the last trading day shall be the preceding business day. Based on last 30 minutes VWAP average. If there are no trades during the last half an hour, then the Theoretical Price would be taken as the official closing price.