Cash-Futures Arbitrage Spread Return Calculator

Risk-Free Yield % · Basis Spread Math · Equity Arbitrage Returns

Calculate exact risk-free annualized yield, basis spread, and net returns for Cash-Futures arbitrage trades.

✓ Risk-Free Return ✓ Equity Tax Status

⚖️ Cash & Futures Prices

Annualized Risk-Free Yield

— %

Total Net Arbitrage Profit: ₹—

Arbitrage Spread Breakdown

Basis Spread per Share—
Total Capital Required—
Absolute Net Profit—
Expiry Convergence Risk ZERO (100% Risk Free)

Cash-Futures Arbitrage Guide

How Cash-Futures Arbitrage Works

During bull markets, futures contracts trade at a premium to cash spot prices. You buy 1000 shares in cash and short 1 futures contract. On expiry day, both prices converge, locking in a risk-free profit.

Equity Tax Benefit Over Bank FDs

Arbitrage Funds & cash-futures positions are taxed as Equity Funds (12.5% LTCG above ₹1.25L). Bank FD interest is taxed at your full slab rate (30%), making arbitrage far superior after tax!

💡 Pro Hack: Rollover Spread Bonus

On expiry Thursday, if the next month's futures contract continues to trade at a premium, roll over your short futures position to extend your risk-free yield for another month!

⚡ Expiry Price Convergence

NSE regulations mandate that futures settlement price equals the cash closing price on expiry. Convergence is 100% guaranteed by law.

🛡️ Zero Market Direction Risk

Whether the market crashes 50% or surges 50%, your cash gain balances your futures loss (or vice versa), yielding exact locked-in profit.

⚠️ 3 Common Cash-Futures Arbitrage Mistakes

  • • Mismatched Quantity: Buying 500 shares in cash while shorting a 1,000 lot futures contract leaves you exposed to unhedged market risk.
  • • Forgetting STT & Transaction Fees: Transaction charges (STT on buy/sell) eat 0.1%-0.2% of the spread. Ensure the spread is wide enough (>0.6%).
  • • Shorting at a Discount (Backwardation): Attempting cash-futures arbitrage when futures trade lower than cash spot creates a guaranteed loss!

Frequently Asked Questions

What is Cash-Futures Arbitrage?
Cash-Futures Arbitrage is a risk-free strategy where an investor buys equity shares in the cash market and simultaneously sells (shorts) an equivalent number of futures contracts trading at a premium.
Why is Cash-Futures Arbitrage considered risk-free?
On contract expiry date, the futures price MUST converge exactly to the spot cash price. Therefore, the premium spread locked in at trade entry is guaranteed profit regardless of market direction.
How is Annualized Arbitrage Yield calculated?
Annualized Yield % = [(Futures Price - Cash Price) / Cash Price] × (365 / Days to Expiry) × 100.
What is Arbitrage Fund taxation in India?
Because Arbitrage Funds maintain >65% average exposure to domestic equities via cash-futures positions, they are taxed as Equity Mutual Funds (12.5% LTCG above ₹1.25L & 20% STCG)—offering huge tax benefits over FD interest!
What transaction costs affect cash-futures arbitrage?
Transaction costs include Brokerage fees, STT (Securities Transaction Tax on cash buy & futures sell), Exchange Turnover fees, Stamp Duty, and GST.
What is 'Basis' in futures trading?
Basis is the price difference between the futures contract price and the cash market spot price. Basis = Futures Price - Spot Cash Price.
What happens if futures trade at a discount (Backwardation)?
If futures trade at a discount to cash spot price (Backwardation), Cash-Futures arbitrage is not viable. Reverse arbitrage (short cash & buy futures) is executed by institutional traders.
What is a good annualized return for cash-futures arbitrage?
Historically, cash-futures arbitrage yields range from 6.5% to 10.5% annualized depending on market sentiment, interest rates, and short rollover spreads.

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