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Just Shoot Me

Bala, 28, Gordon Gekko in the making, pseudo-intellectual, cynic, bibliophile, obsessive compulsive ranter...

Free Lunch?

November 29, 2006

There is an excellent arbitrage oppurtunity currently available in Matrix Labs trading in NSE. The following needs to be done

1) Buy 1 lot December Matrix Lab futures @ 252 Rs
2) Buy 1 lot December Matrix lab put option with strike price 250 @ 11 Rs
3) Sell 1 lot December Matrix lab call option with strike price 250 @ 26 Rs.

When the december settlement is done, the profit guaranteed is 15*1250 = 18750 Rs (minus the brokerage). This oppurunity has risen because of the huge difference between december futures and cash price (which trades at 276 Rs). This difference is due to the end of the open offer period on Dec 11. (Mylan labs is tendering the open offer for Matrix).

The catch : If the person buying the call option you sell, choses to exercise his option then your sell position on the call will get squared. You will have to sell the call again the following day.
posted by Bala, 4:19 PM


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