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Hi Priyanka ,

This is Lokesh student of MIT School Of Business , pune. i am pursuing
2 yrs full time MBA program from same..

I have finished my summer internship program from Religare Securities Ltd
a'bad. now i want projects related to 1. sale of D-mate a/c.
2. Mutual funds. 3. Terminal Trading. 4.Margin Tradin 5. Research of
Equities.


Give my Warm regards to all our frnds and colleagues over ther...


Regards,
Lokesh
 
STRADDLE__THE_MOST_POPULAR_STRATEGY

STRADDLE: THE MOST POPULAR STRATEGY

Radha A Purswani
Faculty Associate, IRC –A



SAILING UPSTREAM

Sometimes, trading in Options is like sailing upstream. The markets are unpredictable, and options have made it possible to trade against the market sentiment and still hedge the risk of unfavorable price movement. By paying a premium, the trader can also lock a favorable purchase price. Options, as a hedging strategy empowers the buyer of the options with the right to exercise it only if the price movement is in his favor. An option, as a trading tool, empowers the trader of the option to trade a large amount of stock with a small amount of money, thus offering leverage.

Using certain Option Strategies it is possible to make a profit in almost any market condition- whether the market goes up or down. Straddle Strategy is one such versatile strategy which can be wisely used when the markets are expected to move in explosive nature- in either direction.


THE STRADDLE STRATEGY

Straddle is a neutral trade strategy which involves buying of a call and put option simultaneously on the same underlying asset (stock), on the same strike price and expiring on the same future date, thus securing the position on either side.

This strategy is appropriate when an explosive market movement is expected for an asset or class of assets, but the direction or magnitude of such market movement cannot be gauged. The investor stands to gain in case of any sudden market movement irrespective of direction. This is not a bearish or bullish strategy; it’s a neutral strategy as the direction of volatility is not known.

Let us try to understand the Straddle Strategy with the help of an example. A company X is bidding for a contract and the bids for the same open after one month. The X company stock is trading currently trading at Rs. 250/-. If company X wins the bid, the share price of Co. X are anticipated to shoot up and if it loses the bid the prices may see an all time low. In such a scenario, an investor can take a refuge in the Straddle Strategy. To initiate a straddle, investor has to buy a call and a put simultaneously. So we decide to buy a Rs. 265 call and a Rs. 265 put. The call as on today is Rs. 15/- out-of-money and the put is Rs. 15 –in-the-money. The premium for the call is Rs. 10 and the premium for the put is Rs. 3. The total premium paid for the straddle is Rs. 13 (the total initial investment).


It’s the D-day for the Co. X and the bid goes in favor of Co. X! Investors are very positive on the stock and the price of Co. X soars to Rs. 285/-. The Rs. 265 call is now Rs. 20 –In-The-Money and the Rs. 265 put is Out-of –The-Money and thus worthless to exercise.

The investor exercises the call option, buys the stock for Rs. 265 while the market price is Rs. 285 and thus earning a profit of Rs. 20 per share against the initial payout of Rs. 13 per share.

To sum up the example:

Company X Current day Contract Expiration day
Market Price Rs. 250 Rs. 285
Status of Rs. 265 call (in-the-money or out-of-the money) Rs. 15 out-of the money Rs. 20 in-the-money
Status of Rs. 265 put (in-the-money or out-of-the money) Rs. 15 in-the-money Rs. 20 out-of-the money
Initial Cost of the Straddle Rs. 13. N.A
Total gain / loss if price rose to Rs. 285 Loss of Rs. 13 (straddle cost) Gain of Rs. 22
Total gain / loss if price fell to Rs. 240 Loss of Rs. 13 (straddle cost) Gain of Rs. 12


The investor may argue that in such a situation buying only call option would have earned him higher profits. Certainly, but if the bid was not in favor of Co. X, then the price could have fallen to Rs. 240. Then, an investor holding only a call option would have lost the entire initial investment of Rs. 10 as the call would have been worthless. While, the investor adopting straddle strategy would have gained from the price fall also. In this case, if the price fell to Rs. 240, the investor would have gained Rs. 12.

The Straddle strategy works well in scenarios like this but doesn’t work well always. It fails when markets don’t move and the prices are stagnant.


Potential to Earn Huge Profits

• The Investor stands to gain huge profits if the market moves steeply in favor of call option. Profits in such a case can be unlimited depending on the magnitude of the market movement.
• In case the market falls sharply in favor of put option, the earnings can go up to maximum of the strike price minus straddle premium (total of premium for call and put options).


BREAK EVEN POINTS:

Low / Down-side Break Even Point 1:
A straddle contract attains its low Break Even Point at the Market Price which is net of Strike Price and Premiums Paid (Strike Price – Total Premium Paid) (Please note we have excluded commissions and other factors to make the calculation simpler).

In the above example, the Low/ Downside Break Even Point would be:

Strike Price (Rs. 265) – Total Premiums paid (Rs. 13) =Rs. 252

This explains that the investor would stand to gain if the price falls below Rs. 252.


High /Up-side Break Even Point 2:
A Straddle Contract attains its High Break Even Point at the Market Price which with total of Strike Price and Premiums paid (Strike Price + Total premium paid). (Note: Commissions and other factors have not been considered to keep the calculation simpler).

In the same example, the High / Up-side Break Even Point is:
Strike Price (Rs. 265) + Total Premiums paid (Rs. 13) = Rs. 278

This explains that the investor would stand to gain if the price shoots above Rs. 278

Straddle as a strategy is successful in this case, if the price falls below Rs. 252 or rises above Rs. 278. In any other case, the investor would be at loss.



LONG STRADDLE:

PURCHASING a call and a put simultaneously of the same underlying stock, at the same strike price and expiring on the same future date is Long Straddle Strategy.

This strategy is adopted when price of a stock is expected to change drastically regardless of direction. It is neutral strategy in Options trading which comes with unlimited profit potential and loss limited to the initial cost of Straddle (premiums paid).


1 & 2 Chicago Board Options Exchange, Chicago (www.cboe.com/Strategies/Index/BuyingIndexStraddles/Part1.aspx)




Let’s continue with the earlier example, where the current market price of “X” company stock is Rs. 250 and anticipating the future volatility the investor has adopted the Long Straddle Strategy.

Purchase of one month Rs. 265 call Premium paid: Rs. 10
Purchase of one month Rs. 265 put Premium paid: Rs. 3
Total cost of Straddle (C) Rs. 13


Let us assume different market prices on the expiration day and try to understand the profits made or losses incurred in different conditions:

Market Price of “X” Exercise Call Exercise Put Cash Inflow Return
(P) (P – Rs.265) (Rs. 265 - P) (I) (I - C)
200 0 65 65 52
230 0 35 35 22
250 0 15 15 2
255 0 10 10 -3
265 0 0 0 -13
275 10 0 10 -3
300 35 0 35 22
320 55 0 55 42



EXHIBIT I: LONG STRADDLE STRATEGY
SHORT STRADDLE

WRITING or SELLING a call and put options simultaneously of the same underlying stock, at the same strike price and expiring on the same future date is Short Straddle Strategy.

The investors may adopt this strategy when price of a stock is anticipate to be little volatile in the near future.

This neutral strategy in options trading is termed as “Limited Profit and Unlimited Risk” strategy. In this strategy, investor earns maximum profit when the market price of the stock is exactly the same as the strike price. This maximum profit is equivalent to the premiums at which the options were sold. But if the price of the stock becomes extremely volatile at the expiration and moves strongly in either direction, the investor may incur huge losses.

Let’s try to understand application of this strategy with the help of an example of Feb Call and Put Options of Reliance Communications (Source: NSE, India)

Price of Reliance Communications as on Jan 22, 07 is Rs. 448.90 and expecting the prices of the stock to be little volatile in future, the investor adopts Short Straddle Strategy.

The investor,
Writes a CA 450.00 Feb (Call American for Rs. 450 expiring in February ).
Premium earned: Rs. 15.10

Writes a PA 450.00 Feb (Put American for Rs. 450 expiring in February).
Premium earned: Rs. 1.60

Total Initial Credits (C) Rs. 16.70 (Rs. 15.10 + Rs. 1.60)

Let us assume different market prices on the expiration day and try to understand the profits made or losses incurred in different conditions:

Market Price of “Reliance Communications” If Buyer of Call Excersise the Call Option If Buyer of Put Exercises the Put Option Cash Outflow Gain
(P) (P – Rs.450) (Rs. 450 - P) (I) (C - I)
430 0 20 20 -3.30
445 0 5 5 11.70
450 0 0 0 16.70
460 10 0 10 6.70
475 25 0 25 -8.30



EXHIBIT II: SHORT STRADDLE STRATEGY



“Limited Profit and Unlimited Risk”

The writer of the call and put options earns profit if the market price of the stock doesn’t move or moves little at the expiration.

We saw in the above example, the maximum profit an investor adopting Short Straddle Strategy makes is the total of the premiums received for writing the call and the put option, i.e., Rs. 16.70 (Rs. 15.10 + Rs. 1.60).

But if the market price moves sharply, up or down, there investor may incur unlimited loss.



LIMITATIONS OF THE STRADDLE STRATEGY

• The trader may incur loss of his entire investment paid as premium in case the market moves sideways or is stagnant.
In case of Long Straddle, the maximum loss is limited to the entire amount paid as premium to buy the call and the put options. Such situation occurs when the market price of the underlying asset closes exactly at the Strike Price on the Expiration. The call and the put option both are “at-the-money” and expire with no value.

• The premiums of call and put options are generally high due to anticipated volatility.

• In case of Short Straddle, the trader may incur unlimited losses if the markets move significantly either upwards or downwards on the expiration of the contracts. The profits are limited to the extent of premium credits but the extent of loss is unlimited.

• The value of straddle erodes with the passage of time because the value of call and put option decreases as it approaches the expiry date.


CONCLUSION

Long Straddle fails when market price doesn’t move. The risk in Long Straddle is limited while the potential to earn profits is huge. Short Straddle fails when the markets move sharply. The risk in Short Straddle is unlimited while the profit potential is limited to premiums earned.


References:

1. Hull, John C, “ Options, Futures and Other derivatives”, 6th Edition, Prentice Hall of India, 2005
2. Cohen, Guy, “Options Made Easy”, 2nd Edition, Financial Times Prentice Hall, 2005.
3. Chicago Board Options Exchange, Chicago (www.cboe.com/Strategies/Index/BuyingIndexStraddles/Part1.aspx)
4. HDFC Securities Ltd, India (www.hdfcsec.com/content/derivatives_strategy_guide.pdf)
5. Straddles and Straddle Strategy (www.option-trading-guide.com/straddles.html)
 
TRADING_ARBITRAGE_WITH_BOX_SPREAD_STRATEGY

TRADING ARBITRAGE WITH BOX SPREAD STRATEGY

Radha A. Purswani

Faculty Associate, IRC-A

[email protected]

INTRODUCTION

Arbitrage is an opportunity which results from mispricing of same/ similar stocks/ options/ futures or stocks with identical cash flows. Arbitrage opportunity occurs when an underlying asset is differently priced compared to its options or futures contract in the same exchange or there exists mispricing of the security (or securities with identical cash flows) between two different exchanges. Arbitrage, can be defined as a phenomena wherein an investor earns a risk free profit by purchasing a stock in one market, and selling it in another market and thus capitalizing on the price differential.

There are various theoretical concepts (based on certain conditions and assumptions) which rule out the possibility of existence of arbitrage opportunities.

A THEORETICAL REVIEW

EFFICIENT MARKET HYPOTHESIS

Efficient Market Hypothesis (EMH), an investment theory by Eugene Fama1, asserts that all the information is always incorporated and reflected in the price of a security. The hypothesis assumes that Securities Markets are exceptionally efficient and mirror all information in the prices of the securities and also in the movement of the market. As the markets have informational efficiency, it is impossible to outperform or beat the market. To elaborate further, there is an active competition among profit maximisers and a free flow of all information and thus the market price of the stock always reflects its true intrinsic value.

Efficient Market Hypothesis rules out the possibility of selecting an undervalued or overvalued security through any kind of technical analysis of stock prices in past or fundamental analysis of financial data and earning greater returns. In other words, EMH asserts that an amateur investor investing in any randomly selected diversified portfolio of stocks would earn an equally generous rate of return as earned by professional fund managers / portfolio managers.

Random Walk Theory, states that prices of securities take a random walk either up or down which cannot be accurately predicted from past prices. This random movement in prices is due to random flow of information which is immediately incorporated and reflected in the prices of the stocks.

The followers of the above stock market theories, Random Walk and EMH, believe that to outperform the market they have to assume additional (above-average) risks; fundamental or technical analysis of stocks is simply a waste of time.

OPTION PRICING BOUNDS

One of the simplest option pricing bounds is that the exercise value of an option should not be more than the value of an option. This means the value of difference between the strike price of an option and current market price of underlying asset should be the value/ price of option. If the price of an option is greater or lesser than the difference, then there exists an opportunity for arbitrage.

In case of a Call option, there exists an arbitrage opportunity if the price of call is greater than the difference between the Value of underlying assent and Net Present value of Strike Price.

In case of a Put option, there exists an arbitrage opportunity if the Value/ Price of Put option is greater than the difference between the Value of Underlying Asset and Net Present value of Strike Price.

The above option Pricing Bound can also be explained with the help of Spot-Future parity theory. As per the “Law of One Price2”, the current market price of an underlying stock should be equal to the net present value (discounted at the prevailing rate of risk free return by the time to settlement) of the current price of the contract.

PUT-CALL PARITY

Put- Call Parity is about the relation between the value / price of a put and a call option of the same underlying stock, same strike price and same expiration date.

As per put-call parity theory, "in absence of arbitrage opportunity, the current value of an underlying stock plus the current value of a put option (European Put) on the same underlying stock should equal the current value of risk free bond (same maturity value as call/put option) plus the current value of a call option (European Call) on the same underlying stock”3. The expiration date or time to maturity is the same in all the four cases. This means that the value of two different portfolios (one portfolio with an underlying stock and put option and the other portfolio with a bond and a call option) is the same. If values of the portfolios are not equal, an investor can go short in the dearer portfolio and long in the cheaper one to gain out of arbitrage opportunity available.

The violation of any of the conditions or assumptions of the above theories –Efficient Market Hypothesis or Law of One Price or Put-Call Parity results in arbitrage opportunities for investors.

A Brief Analysis of above Theories:

The above theories apply to perfect / efficient markets where the prices of stocks and derivatives move simultaneously. But, it is often observed that there exists inconsistency in prices of the same stocks in different exchanges or inconsistency in the price of underlying asset and its options contract, or inconsistency in the price of call and put options. This inconsistency results in arbitrage opportunities which are otherwise assumed to be non-existent.

Such arbitrage opportunities vanish in a few seconds due to simultaneous buying cheaper asset and selling dearer asset and cause price equilibrium and market efficiency with the help of forces of demand and supply.

We hereby try to test whether the arbitrage opportunities exist in Options Markets in India with the help of a combination strategy called Box Spread Strategy. Thus, we also study the efficiency of the Options Market in India.

THE FRAMEWORK FOR STUDY4

Box Spread is a combination strategy where two options spread positions are formed to earn a constant risk free payoff in any market condition. With Box Spread Strategy a “near-riskless”5 position is formed.

Let’s understand the framework used for constructing a box spread. To construct a box spread, we have to construct a Bull Spread and a Bear Spread with European options.

We construct the box spread using a common underlying stock with same expiration date but with two different exercise prices, as follows:

1. Buy a Low Exercise Price Call Option

2. Sell a High Exercise Price Call Option

3. Buy a High Exercise Price Put Option

4. Sell a Low Exercise Price Put Option

We may require an initial outlay in constructing the above spread depending on the values of call and put option.

We are aware that payoff from Box spread Strategy is the difference between High Exercise Price and the Low Exercise Price, which is always constant and immaterial of market price of the underlying stock on maturity (expiration).

To test whether arbitrage opportunities exist in options market, we frame following portfolios:

Portfolio I :A Portfolio consisting of call and put options, combined to form a

Box Spread

Portfolio II :A Portfolio where the amount equivalent to present value of payoff from

Box-Spread is invested in a risk free asset.

Present Value of Payoff:

Present value of the payoff from Box-spread strategy can be arrived at by discounting the payoff with prevailing risk free rate of interest for the time to maturity (expiration) of the contracts.

Present Value = Future Value

--------------

(1+r)n

where r is the risk free rate of Return.

n is the time in no. of years

Risk Free Rate of Return:

We take the prevailing rate of T-bills as the risk free rate of return.

The T-bill rate taken for the study is 7.48% (source: RBI)6

Arbitrage Opportunity:

We shall study the returns from both the above portfolios and for arbitrage opportunity not to exist the returns or the payoffs from both the portfolios should be equal. If the returns are unequal, there exists arbitrage opportunity for the investor/ arbitrageur. This is also termed as violation of Box Spread Parity.

Why Box Spread Strategy:

There are various advantages Box Spread Strategy offers to test whether the markets are efficient and if not then if arbitrage opportunities exist.

We need not take in consideration any option pricing model if we use box spread strategy.7
In case where Nifty Index is examined, the options available are European –style and going long or short in Box Spread is like risk free lending or borrowing.8
Using box spread does not involve predicting market movement nor does involve computation of impact of other policy decisions.
Following important points to be noted about the data set:

The data set in Exhibit I and II is taken from National Stock Exchange (NSE), India, “a technology driven exchange, with fully automated screen based trading system”9
The options contract available on 1st Feb, 2007 for Reliance Communications with non zero number of contracts (in both Call and Put Options) are considered in Exhibit I.
The options contracts of Reliance Communications (RCOM) are American Options.
The Nifty Index Options available on 1st Feb, 2007 with non zero number of contracts (both call and put options) are considered.
In the Nifty Index Options, the underlying asset is Nifty Index comprising of 50 large-cap Indian companies from all major sectors accounting for almost 60 per cent of the market capitalization.10
The type of Options Contracts available for Nifty is European.
We define existence of arbitrage as phenomena wherein the payoff from the two portfolios is different.
The above exercise can be done for options contracts of other stocks and also for CNXIT Index and also for options contract of two and three months.
To understand the existence of arbitrage opportunities we calculate the gain for each of the exercise price options contract available provided the no. of contracts is non- zero value.
We assume that trades can be really exercised at the prevailing quotes.
CALCULATION

Given above conditions and definitions let us scan through the given options contracts on 1st Feb, 2007 for Reliance Communications (RCOM) on NSE India and study if ‘Arbitrage Opportunity’ existed and if options markets are efficient or otherwise.

As explained in the framework for study, we consider two portfolios. In Portfolio I we take different combinations of the strike prices available for a particular date and form a box spread and arrive at the net premiums paid for the call and puts. The same is compared with the present value of payoff from box spread strategy (which is Portfolio II).

EXHIBIT I: Arbitrage Calculation for Reliance Communications Options Contracts

Date Expiry Low Strike Price (X1) High Strike Price (X2) Premium for Call Option with X1 Strike Price (Cx1) Premium for Call Option with X2 Strike Price (Cx2) Premium for Put Option with X1 Strike Price (Px1) Premium for Put Option with X2 Strike Price (Px2) Payoff from Portfolio I (CX1-CX2+ PX2-PX1) HSP*-LSP** (X3 = X2-X1) Payoff from Portfolio II [Discounted Value of X3 (X3er (T-t)] Diff between Portfolio I & Portfolio II (Portfolio II - Portfolio I)
1-Feb-07 22-Feb-07 440 450 38.5 30.65 3.15 5.15 9.85 10 9.94 0.09
1-Feb-07 22-Feb-07 440 460 38.5 22.9 3.15 7.8 20.25 20 19.88 -0.37
1-Feb-07 22-Feb-07 440 470 38.5 17.2 3.15 12.75 30.9 30 29.82 -1.08
1-Feb-07 22-Feb-07 440 480 38.5 12.85 3.15 17 39.5 40 39.76 0.26
1-Feb-07 22-Feb-07 450 460 30.65 22.9 5.15 7.8 10.4 10 9.94 -0.46
1-Feb-07 22-Feb-07 450 470 30.65 17.2 5.15 12.75 21.05 20 19.88 -1.17
1-Feb-07 22-Feb-07 450 480 30.65 12.85 5.15 17 29.65 30 29.82 0.17
1-Feb-07 22-Feb-07 460 470 22.9 17.2 7.8 12.75 10.65 10 9.94 -0.71
1-Feb-07 22-Feb-07 460 480 22.9 12.85 7.8 17 19.25 20 19.88 0.63
1-Feb-07 22-Feb-07 470 480 17.2 12.85 12.75 17 8.6 10 9.94 1.34

*HSP- Higher Strike Price

**LSP- Lower Strike Price

EXHIBIT II: Arbitrage Calculation for Nifty Index Options Contracts

Date Expiry Low Strike Price (X1) High Strike Price (X2) Premium for Call Option with X1 Strike Price (Cx1) Premium for Call Option with X2 Strike Price (Cx2) Premium for Put Option with X1 Strike Price (Px1) Premium for Put Option with X2 Strike Price (Px2) Payoff from Portfolio I (CX1-CX2+ PX2-PX1) HSP-LSP (X3 = X2-X1) Payoff from Portfolio II [Discounted Value of X3 (X3er (T-t)] Diff between Portfolio I & Portfolio II (Portfolio II- Portfolio I)
1-Feb-07 22-Feb-07 3700 3800 435.05 342.7 6.7 11.55 97.2 100 99.40 2.20
1-Feb-07 22-Feb-07 3700 3900 435.05 261.9 6.7 23.2 189.65 200 198.80 9.15
1-Feb-07 22-Feb-07 3700 3950 435.05 200 6.7 30.15 258.5 250 248.50 -10.00
1-Feb-07 22-Feb-07 3700 4000 435.05 178.05 6.7 42.2 292.5 300 298.20 5.70
1-Feb-07 22-Feb-07 3700 4050 435.05 142.25 6.7 55.25 341.35 350 347.90 6.55
1-Feb-07 22-Feb-07 3700 4090 435.05 85.5 6.7 66 408.85 390 387.66 -21.19
1-Feb-07 22-Feb-07 3700 4100 435.05 107.95 6.7 71.15 391.55 400 397.60 6.05
1-Feb-07 22-Feb-07 3700 4120 435.05 93 6.7 114.6 449.95 420 417.48 -32.47
1-Feb-07 22-Feb-07 3700 4150 435.05 78.3 6.7 89.85 439.9 450 447.30 7.40
1-Feb-07 22-Feb-07 3700 4200 435.05 54.4 6.7 117.2 491.15 500 497.00 5.85

OBSERVATIONS FROM THE ABOVE CALCULATION & EXISTING LITERATURE:

The value of Portfolio I and Portfolio II are not equal in any case. But this doesn’t mean that every combination of the above contracts offers arbitrage opportunity.
The above calculation is exclusive of transaction cost, commissions, etc. The same when accounted for in above study shall give the actual arbitrage gain and accurate identification of its existence.
Return from Portfolio I > Portfolio II:
If the payoff from Portfolio I is higher than Portfolio II, then investor/ trader can tap the arbitrage opportunity by selling Portfolio I, book a profit and invest the principal in a risk free instrument.

Return from Portfolio II > Portfolio I:
If the payoff from Portfolio II is greater than Portfolio I, then investor / trader can tap the arbitrage opportunity by selling buying Portfolio I by borrowing money at the risk free rate of return.

It is observed and suggested that to identify arbitrage opportunities faster we concentrate on near-at-the-money rather than deep-out-of-money contracts, as the probability of execution and/ or liquidity of such contracts is low.11
All the arbitrage opportunities available are not exclusively available; tapping one arbitrage opportunity may lead to elimination of other arbitrage opportunities available.
As the arbitrage opportunities exist only for few seconds, big investors with high tech tools and deep pockets can profit substantially from the same.
CONCLUSION:

The arbitrage opportunities do exist and if the transaction costs, commissions and other factors are considered we can arrive at realistic values where risk free arbitrage trade can be executed. But this does not overtake the fact that NSE Option market is not efficient. The fact that these opportunities exist for few seconds, with low margins due to high transaction fees and the gains can be generally tapped by high end traders, it proves that markets are efficient though with some room for arbitrage trading.



1 Eugene Fama, Ph.D. (economics-finance), University of Chicago, 1964, advocated the “Efficient Market Theory”.



2 “Law of One Price” –a law in economics which states that if the markets are efficient, then the price of all similar / identical goods would be one.



3 “The Put Call Parity Theorem”, John Norstad, March 7, 1999, updated on Jan 28, 2005, available on http://homepage.mac.com/j.norstad/finance/parity.pdf



4 The Framework for Study adopted from Uri Benzion, et al., “Box Spread Strategies and Arbitrage Opportunities”, The Journal of Derivatives, Spring 2005, page 49.



5 http://www.cboe.com/LearnCenter/Glossary.aspx



6 www.rbi.org



7 Michael L Hemler and Thomas W. Miller, Jr., “ Box Spread Arbitrage Profits Following the 1987 Market Crash: Real or Illusory?”, Journal of Financial and Quantitative Analysis, Vol 32. No. 1, March 1997, page 71 to 90.



8 Michael L Hemler and Thomas W. Miller, Jr., “ Box Spread Arbitrage Profits Following the 1987 Market Crash: Real or Illusory?”, Journal of Financial and Quantitative Analysis, Vol 32. No. 1, March 1997, page 71 to 90



9 http://www.nse-india.com/content/us/fact2006_sec1.pdf, page 1to 11.



10 Sulagna Chakravarty, “Sensex? What’s that?”, Dec 10,2004, Rediff News,

weblink: http://in.rediff.com/getahead/2004/dec/10sensex.htm



11 Uri Benzion, et al., “Box Spread Strategies and Arbitrage Opportunities”, The Journal of Derivatives, Spring 2005, page 52.
 
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