And "index swap" is the exchange of a fixed price for the index price at a certain location, i.e. the Permian index. A "futures swap" is the exchange of a fixed price for the futures price (typically the reference futures price is calculated by averaging over three days prior to maturity and is called L3D). A "basis swap" is the exchange of a fixed price for the difference between the index price and the futures price.

Suppose the following swaps are available: Index swap Permian for $4.75; Basis swap (Permian - L3D) for (- $0.25); Futures swap L3D for $5.02. What is the arbitrage opportunity? Show the cash flow on the diagram below. What is the arbitrage profit?