CASH-AND-CARRY ARBITRAGE

 

  • A strategy, used in bond or stock index futures, in which a trader sells a futures contract and buys the underlying to deliver into it, to generate a riskless profit.
    For the strategy to work, the futures contract must be theoretically expensive relative to cash. Cash-and-carry arbitrage and reverse cash-and-carry arbitrage typically keep the futures and underlying markets closely aligned.

 

Related Terms:

Basis trading        Reverse cash-and-carry arbitrage

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