Sell Spot Buy Foward P/L

[XxQuote399]

Hello,

What is the P/L of a sell(buy) forward and buy(sell) spot looks like ?

It is change for both sides or theres a lock-in ?

Thanks

 

[optionsrules]

What do you mean exactly?

 

[XxQuote399]

I mean if I sell spot and buy forward I am with a locked hedge

 

[Hakuna Matata]

it's a basis trade

Basis trading - Wikipedia, the free encyclopedia

 

[optionsrules]

it's a basis trade

Basis trading - Wikipedia, the free encyclopedia

You are locked in if you buy the spot and sell the forward or futures.

 

[Hakuna Matata]

You are locked in if you buy the spot and sell the forward or futures.

you're exposed to a change in the discount rate.

 

[XxQuote399]

serious thanks for the helps

 

[moka2]

Hello,

What is the P/L of a sell(buy) forward and buy(sell) spot looks like ?

It is change for both sides or theres a lock-in ?

Thanks

IF you are long underlying and Short Future on same
AT expiary they wil converge
But Is it not true that the cost of carry for the Long position is already factored in to the Futures price!
On One Chicago there is product caled "Exchange for Physical"
But the yiekd is hardly anything in USA

A) You own stock... ( LONG) + You sell Future on same at expiary you have to giv ethe stock
B) You have cash > You purchase stock > You sell Future on same

 

[thunderstruck]

Actually if you sell spot and buy future is like borrowing .

You sell the stock and receive money from which you give a percentage for margin and you can use the rest of the money until the maturity date of the contract to pay for the physical delivery .

The interest rate is incorporated in the price of the future so asuming efficient markets what you pay is the interest rate .

ex Assume you sell X at 100$ and buy the 12 month future at 101$ in essense you borrow 100$ for an 1% interest rate (this is assuming no margins -if the margin is 15% you borrow 85$ for 1.2%)

PS Usefull if you need cash but want to keep the stock.

 

[holmes16]

just be careful with how your broker finances your positions. if you're getting 'gross financing' then your the cash you get from long positions might not net off with the cash from your short positions. also, most brokers give you a spread such as: libor - 50 bps on your long cash, libor + 50 bps on your short cash. this can really eat the profit on basis trades.