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Why cant I short sell from the spot right now and buy using a long futures and make a profit here when the futures price
Why cant I short sell from the spot right now and buy using a long futures and make a profit here when the futures price is less than the spot price
Show that, if the futures price of a commodity is greater than the spot price during the delivery period, then there is an arbitrage opportunity. Does an arbitrage opportunity exist if the futures price is less than the spot price? Explain your answer. Ans 12) If the futures price is greater than the spot price during the delivery period, an arbitrageur buys the asset, shorts a futures contract, and makes delivery for an immediate profit. If the futures price is less than the spot price during the delivery period, there is no similar perfect arbitrage strategy. An arbitrageur can take a long futures position but cannot force immediate delivery of the asset. The decision on when the delivery will occur is made by the party with the short position. Nevertheless, companies interested in acquiring the asset may find it attractive to enter a long futures contract and wait for delivery to be made
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