Strategy #0000000036 · Index relative value
Index cash-and-carry arbitrage
Pair cash and futures for expiry convergence; costs and dividend estimates determine feasibility.
Index-futures fair value depends on spot, funding, expected dividends and time to expiry. A sufficiently rich future may motivate buying the cash basket and shorting futures. Constituent replication, dividend forecasts, borrow, taxes, margin and settlement basis can make a quoted gap untradeable.
Theoretical basis must clear funding, dividend and trading costs.
Three ways in
Understand the story. Then inspect the risk.
Start with a familiar situation, check the payoff, then test how the numbers change.
The idea · in two minutes
Calculate carry before reading the futures basis
Jack sees an index future 1.2% above spot and wants to short it. Rose first computes funding and expected dividends, then compares fair value with the market at the same timestamp.
Only basis beyond both-leg spreads, basket costs, dividend error and funding may offer convergence room. Cash settlement does not remove tracking error or margin liquidity risk.
The scenario estimates points from assumed basis convergence. It has no live basket, fills or dividends; empirical work must reconstruct constituents, contract tenor and costs.
- Spot plus fundingFair value uses user-entered spot, funding, dividend and futures assumptions.
- Less assumed dividendsThe output is an index-point scenario, not an executable arbitrage.
- Market futures minus fair value, less costCash settlement does not eliminate interim margin needs.
Illustrative research examples only. They are not live signals or a recommendation.
The mechanics · payoff and exposure
F^*=S_0\exp((r-q)T),\quad PnL=F_0-F^*-Costs
S₀ is spot, r funding, q expected dividend yield and T time to expiry in years. Continuous compounding is an approximation; contract pricing uses dividend points and settlement rules.
Greeks: the directional intuition
- 股息估計
- Measures sensitivity to implied volatility.
- 執行基差
- Measures sensitivity to implied volatility.
- 保證金
- Measures sensitivity to implied volatility.
F^*=S_0\exp((r-q)T),\quad PnL=F_0-F^*-Costs
Practical context · published observations
Index cash-and-carry arbitrage: read the record with its caveats.
The chart uses the published figures or explicitly labelled study inputs below. A historical index or model replay is not the same as an investor’s realised account return.
採連續複利簡式，不含逐檔股息、稅費、借券、衝擊成本、保證金或合約規格。 Source ↗ · Methodology ↗
Change assumptions and inspect the scenario
Inputs illustrate the strategy mechanics; they are not live quotes, forecasts or investment advice.
Variants · same family, different risk levers
Related implementations use different legs and frictions.
The changed instrument changes what can go wrong.
| Related strategy | Relationship | What changes | New cost or risk |
|---|---|---|---|
| Positive-basis cash-and-carry | Future rich | Buy cash and sell futures through settlement. | Funding and basket transaction costs. |
| Reverse cash-and-carry | Future cheap | Short the cash basket and buy futures. | Borrow availability and dividend compensation. |
| ETF–futures basis | ETF proxy | Use an ETF to proxy the cash index. | ETF fees and NAV basis remain. |
The fair-value scenario is not a backtest or risk-free profit.
Read beyond the summary
References
Primary sources and research used to describe the strategy and its limits.