Index Arb?

[greenhog]

Can anyone tell me why this looks too good to be true?

My SB firm quoting 5361/5367for rolling cash FTSE & 5295/3305 for the june future. These prices will converge as as time moves closer to expiry.

If i short the cash and buy the future it looks like a very good arb oportunity.

From what i can see the only risks are the market being volitile during the period up to expiry, meaning large margin calls or some freak event close to expiry so the spread widens/moves as I try to exit.

Am I missing something with regards to risk?

Also would anyone know if a SB firm would require margin for both sides of the trade?

 

[Skill Leverage]

*slaps forehead*

 

[greenhog]

go on then clever clogs, whats the problem with it?

 

[Skill Leverage]

try it mate.`

 

[greenhog]

and what will happen.....?

I presume there is some obvious problem with this or you would all be at it......... not as clever as you mate........ trying to find out what the problem is before I try it

 

[dealer911]

I think the costs of holding the positions would wipe out any gain you would make..I dont think you are asking a stupid question at all...keep looking for those opportunities.. and keep asking the questions!

 

[Skill Leverage]

Stop being so touchy - I would provide you with an explanation, but I mean, come on... a question like this just shows a complete lack of respect for the markets. This is one of the hardest professions in the world mate, do you honestly think that if there was any profit to be made in this sort of trade that we wouldn't all be doing it?

 

[greenhog]

sorry, how do you mean costs?

 

[dealer911]

Stop being so touchy - I would provide you with an explanation, but I mean, come on... a question like this just shows a complete lack of respect for the markets. This is one of the hardest professions in the world mate, do you honestly think that if there was any profit to be made in this sort of trade that we wouldn't all be doing it?

Lack of respect for the markets ??... any question is a valid question..and you didnt answer him either... shows you have a lack of respect for forums... this is where people come to share experience and to ask questions.. they shouldnt have the p1ss taken out of them.. and anyway it was a good question.

 

[greenhog]

Stop being so touchy - I would provide you with an explanation, but I mean, come on... a question like this just shows a complete lack of respect for the markets. This is one of the hardest professions in the world mate, do you honestly think that if there was any profit to be made in this sort of trade that we wouldn't all be doing it?

exactley... thats why i said it must be too good to be true.... i'm looking for someone to explain why....

 

[dealer911]

sorry, how do you mean costs?

there are interest charges for holding positions.. if you put on a cash rolling daily trade and hold it for a few months those daily interest charges will add up.

 

[greenhog]

there are interest charges for holding positions.. if you put on a cash rolling daily trade and hold it for a few months those daily interest charges will add up.

Thank you