Ahmad has just learned about derivatives and in particular, how they can be used to conduct arbitrage. Using the Cost of Carry model, he computed that the correct price for FBM KLCI futures should be 1,578.5 points. Meanwhile, the corresponding FBM KLCI futures contract is currently priced at 1,580 points. To carry out the arbitrage strategy, Ahmad decides to long the futures contract and simultaneously short the spot KLCI. Comment on this strategy.

Ahmad remarked the following: Based on my calculations, there is opportunity to arbitrage the FBM KLCI using futures. My gut feeling is that there will be a big next Covid-19 wave and it will hit the Malaysian equities market. If this happens, I will make a lot more profit with my arbitrage strategy. If it doesnt pan out that way, I will still make a decent profit because my arbitrage strategy is a risk-free position. Comment on Ahmads statement.