Equity index futures
How do I execute an Index Arbitrage trade exploiting premium differences between cash index buckets and futures?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
Index arbitrage exploits temporary price gaps between a cash index basket and its corresponding futures contract through simultaneous offsetting trades.
How it works
Arbitrageurs buy the cheaper side and sell the richer side, and their activity helps keep futures and cash prices closely aligned.
An example
A futures premium above fair value may prompt arbitrage selling of futures.
Risk & limitations
Index arbitrage requires significant capital and speed; retail replication is often impractical.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.