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Index arbitrage

A strategy designed to 

Profit

 from temporary discrepancies between the prices of the stocks comprising an 

Index

 and the price of a futures 

Contract

 on that index. By buying either the stocks or the futures 

Contract

 and selling the other, an investor can sometimes exploit 

Market

 inefficiency for a profit. Like all 

Arbitrage

 opportunities, index 

Arbitrage

 opportunities disappear rapidly once the opportunity becomes well-known and many investors act on it. Index 

Arbitrage

 can involve large 

Transaction

 costs because of the need to simultaneously 

Buy

 and 

Sell

 many different stocks and futures, and so only large 

Money

 managers are usually able to 

Profit

 from 

Index

 arbitrage. In addition, sophisticated computer programs are needed to keep track of the large number of stocks and 

Futures

 involved, which makes this a very difficult 

Trading

 strategy for individuals.



Related Terms: 24

Action

,

Arbitrage

,

Buy

,

Contract

,

Futures

,

Futures contract

,

ISIN

,

Index

,

Index arbitrage

,

Money

,

Manager

,

Market

,

Market inefficiency

,

NOW

,

Own

,

Profit

,

PPO

,

Put

,

Program

,

Rent

,

Sell

,

Transaction

,

Trading

,

Unit


Other Related Pages:

Category: Trading


Starting With: I


Semi Related Terms: 900  CLICK HERE TO VIEW

10-K

,

19c3 stock

,

Accelerated Cost Recovery System

,

Acquisition cost

,

Allowance for depreciation

,

Annuity unit

,

Adjustable rate

,

Accrual of discount

,

Accrued market discount

,

American Stock Exchange

,

Amortization of premium

,

Asked price

,

Asking price

,

At par

,

All or any part

,

At best

,

At call

,

Active money

,

Adjustable rate preferred stock

,

Adjusted futures price

,

All-risks coverage

,

At risk

,

Add-on service

,

Abstract of title

,

Action to quiet title

,

Adhesion contract

,

As is

,

Assignment to creditors

,

Attorney in fact

,

Adjustable Rate Mortgage

,

Advance rate

,

Affordability index

,

Annual Percentage Rate

,

Applicable federal rate

,

Assignment of mortgage

,

A shares

,

Average price per share

,

Aggregate exercise price

,

At the money

,

Absorption rate

,

Accumulation unit

,

Age-weighted plan

,

Across the board

,

Action

,

Additional paid-in capital

,

Arbitrage

,

Arbitrage house

,

Arbitrage Pricing Theory

,

Ad valorem

,

Arms Index

,

Active market

,

After-hours trading

,

Against the box

,

At the bell

,

At the close

,

At the figure

,

At the full

,

At the market

,

At the opening order

,

Auction market

,

Automated Pricing and Reporting System

,

Away from the market

,

Accredited investor

,

Angel investor

,

Below the line

,

Book profit

,

Books of final entry

,

Books of original entry

,

Burn rate

,

Banking Act of 1933

,

Barren money

,

Benchmark interest rate

,

Bid-to-cover ratio

,

Bond market

,

Bullet contract

,

Bureau of Public Debt

,

Buy

,

Brought over the wall

,

Buying on margin

,

Buy limit order

,

Buy minus

,

Buy minus order

,

Buy on close

,

Buy on opening

,

Buy order

,

Buy stop order

,

Buy the book

,

Broad money

,

Balance of payments

,

Bank Rate

,

Base interest rate

,

Bear market

,

Board of Governors

,

Buying power

,

Basis trading

,

Buying basis

,

Buying hedge

,

Bulldog market

,

Breaking the syndicate

,

Bill of exchange

,

Bill of sale

,

Breach of trust

,

By the book

,

Base rate

,

Blended rate

,

Broker loan rate

,

B shares

,

Buy and write

,

Borrowed stock

,

Broad-base index

,

Buy-side

,

Balanced investment strategy

,

Barbell strategy

,

Bullet strategy

,

Break-even tax rate

,

Breadth-of-market theory

,

Beat the gun

,

Bull market

,

Buying outright

,

Capital efficiency

,

Capitalized cost

,

Contra account

,

Cost Accounting

,

Cost Of Goods Sold

,

Cost of sales

,

Call price

,

Capital market

,

CAT bond

,

Certificate of Participation

,

Committee on Uniform Securities Identification Procedures

,

Common stock equivalent

,

Conversion parity price

,

Conversion price

,

Coupon rate

,

Current market value

,

Current production rate

,

CUSIP number

,

Call money rate

,

Code of procedure

,

Contra broker

,

Contract broker

,

Covered arbitrage

,

Capitalization of income

,

Capitalization rate

,

Cap rate

,

Civilian unemployment rate

,

Consumer confidence index

,

Consumer Price Index

,

Cost of Living Adjustment

,

Cost-of-living index

,

Council of Economic Advisers

,

Cyclical stock

,

Cash and carry trade

,

Cash market

,

Cash price

,

Certificated stock

,

Chasing the market

,

Cheapest to deliver

,

Chicago Board of Trade

,

Commodities Exchange Act

,

Commodity futures

,

Commodity Futures Trading Commission

,

Commodity Trading Advisor

,

Contract grades

,

Contract market

,

Contract month

,

Cost basis

,

CINS number

,

Cost-of-living rider

,

Callable stock

,

Certificate of stock

,

Consumer stock

,

Control stock

,

Corporate action

,

Cost of carry

,

Certificate of title

,

Class action suit

,

Contract

,

Contract for deed

,

Contract sale

,

Cancellation of debt

,

Certificate of Claim

,

Cost of debt capital

,

Cost of funds

,

C shares

,

Class of options

,

Close to the money

,

Closing transaction

,

Contract size

,

Conversion arbitrage

,

Covered put

,

Certificate of Occupancy

,

Cloud on title

,

Cash or Deferred Arrangement

,

Capitalization weighted index

,

Choice market

,

Class A Shares

,

Class B Shares

,

Convertible arbitrage

,

Crash of 1929

,

Crash of 1987

,

Compound arbitrage

,

Child and dependent care credit

,

Coefficient of determination

,

Cup and handle

,

Cash buying

,

Certificate of delivery

,

Close a position

,

Close market

,

Closing price

,

Continuous market

,

Cornering the market

,

Curbs in

,

Depreciated cost

,

Direct profit

,

Deposit in transit

,

Date of issue

,

Date of payment

,

Dealer market

,

Debt market

,

Dollar price

,

Dual currency bond

,

Dual listing

,

Division of Enforcement

,

Division of Investment Management

,

Division of Market Regulation

,

Date of record

,

Dividend in arrears

,

Dividend rate

,

Desk (the)

,

Discount rate

,

Division of labor

,

Daily trading limit

,

Delivery price

,

Dual life insurance

,

Deal stock

,

Defensive stock

,

Distribution stock

,

Donated stock

,

Directed share program

,

De-escalation clause

,

De facto

,

Durable Power of Attorney

,

Date of maturity

,

Debtor in possession

,

Debtor-in-possession financing

,

Deed of Release

,

Deed of Trust

,

Discharge of bankruptcy

,

Discharge of lien

,

Due-on-sale clause

,

Dollar cost averaging

,

Dual-purpose fund

,

Deep in the money

,

Deep out of the money

,

Deed of Surrender

,

Department of Housing and Urban Development

,

Direct participation program

,

Dirty stock

,

Defensive investment strategy

,

Dogs of the Dow

,

Dead cat bounce

,

Deep market

,

Depth of market

,

Double auction market

,

Efficiency ratio

,

Effective annual interest rate

,

Eurodollar certificate of deposit

,

Escrowed to maturity

,

Ex-legal

,

External market

,

Either-or order

,

European Currency Unit

,

Exchange rate

,

Extended broad money

,

Economic growth rate

,

Edge Act

,

Employer Cost Index

,

Employment Cost Index

,

E-mini

,

Exchange for futures

,

Exchange for physical

,

Exchange of spot

,

Ex-pit transaction

,

EAFE Index

,

Emerging market

,

Effective tax rate

,

Employee Stock Purchase Plan

,

Employee stock repurchase agreement

,

Ex-all

,

Exit strategy

,

Enhanced index fund

,

Expiration time

,

Ex-warrants

,

Economic rent

,

Employee Retirement Income Security Act of 1974

,

Ex-rights

,

Ex-rights date

,

First In First Out

,

Fixed cost

,

Federal Savings and Loan Association

,

Fixed-income arbitrage

,

Flight to quality

,

Floating-rate bond

,

Flow of funds

,

Full price

,

Fill or kill

,

Flotation costs

,

Front-ending an order

,

Fiat money

,

Floating exchange rate

,

Foreign exchange rate

,

Forward exchange rate

,

Forward P/E

,

Factors of production

,

Favorable balance of trade

,

Federal Reserve Discount Rate

,

Free market

,

Free market price

,

Financial futures

,

Forward price

,

Futures

,

Futures contract

,

Futures option

,

Futures price

,

Fee-for-service

,

Fair market value

,

First preferred stock

,

Form 8-K

,

Form S-1

,

Full stock

,

Friends and family offering

,

Fair Credit Reporting Act

,

Fair Debt Collection Practices Act

,

Fixed rate

,

Fixed-rate loan

,

Fixed-Rate Mortgage

,

Floating rate

,

Forward interest rate

,

Forward Rate Agreement

,

Full faith and credit

,

Family of funds

,

Fund manager

,

Fund of funds

,

Free and clear

,

Federal Insurance Contributions Act

,

Free right of exchange

,

Federal ID Number

,

Federal Tax Identification Number

,

Fourth market

,

Gross profit

,

Gross profit margin

,

Guaranteed Investment Contract

,

Glass-Steagall Act

,

Growth stock

,

G-7

,

GDP implicit price deflator

,

General Agreement on Tariffs and Trade

,

G-8

,

Growth strategy

,

Growth and income fund

,

Gather in the stops

,

Graveyard market

,

Historical cost

,

Hart-Scott-Rodino Act of 1976

,

Hit the bid

,

House of issue

,

Hang Seng Index

,

Health Insurance Portability and Accountability Act

,

High-tech stock

,

Holder in due course

,

Home equity line of credit

,

Home Mortgage Disclosure Act

,

Housing Market Index

,

Head and shoulders

,

High-low index

,

Hammering the market

,

Held at the opening

,

Historical trading range

,

Holding the market

,

Horizontal price movement

,

Index bond

,

Index-linked bond

,

In escrow

,

Interest rate collar

,

Interest rate risk

,

Interest rate swap

,

International Securities Identification Number

,

ISIN

,

In-house

,

Investment Advisor Act of 1940

,

Investment Company Act of 1940

,

Income stock

,

In line

,

Index

,

Inefficient market

,

Inflation rate

,

Interest rate futures

,

Inverted market

,

Interbank Rate

,

Internal market

,

Individual policy pension trust

,

Inside market

,

Insider trading

,

Insider Trading sanctions Act of 1984

,

Internal Rate of Return

,

Investor relations

,

Indication of interest

,

In intestacy

,

Interest-only loan

,

Interest rate

,

Interest rate cap

,

Interest rate ceiling

,

Interest rate floor

,

In play

,

In-process research and development

,

Index fund

,

Index option

,

Interest rate option

,

I/O strip

,

Installment sales contract

,

Interest-only strip

,

In-service withdrawal

,

Index arbitrage

,

Individual tax return

,

Imbalance of orders

,

Imperfect market

,

In and out

,

Individual investor

,

Institutional investor

,

In sympathy

,

Intermarket Trading System

,

In the tank

,

Jointly and severally

,

Jumping the gun

,

Joint and several liability

,

Joint and survivor annuity

,

Joint Stock Company

,

Jensen index

,

Know Your Customer

,

Last In First Out

,

Lender of last resort

,

Law of one price

,

Lead manager

,

Lending at a rate

,

Limit-on-close order

,

Limit price

,

Long Market Value

,

Lawful money

,

Law of demand

,

Law of supply

,

Last trading day

,

London International Financial Futures and Options Exchange

,

London Inter-Bank Offer Rate

,

Loan stock

,

Letter of comment

,

Legal age

,

Line of credit

,

Loan-to-cost

,

Loan-to-value

,

Lock-in

,

Land contract

,

Large cap

,

Leading the market

,

Ladder strategy

,

Like-kind exchange

,

Locked in

,

Long-term gain or loss

,

Level I quotes

,

Liquid market

,

Locked market

,

Money center bank

,

Money order

,

Market basket

,

Market capitalization

,

Market conversion price

,

Matrix trading

,

Make a market

,

Margin buying

,

Margin rate

,

Market if touched order

,

Market letter

,

Market maker

,

Market maker spread

,

Market on close order

,

Market order

,

Mark-to-market

,

Money management

,

Medium of exchange

,

Money

,

Marginal propensity to consume

,

Market economy

,

Misery index

,

Marginable stock

,

Make whole provision

,

Market rate

,

Money at call

,

Money factor

,

Mortgage rate

,

Management buyin

,

Manager

,

Married put

,

Market cap

,

Market neutral

,

Market portfolio

,

Market timer

,

Market timing

,

Mill rate

,

Market analysis

,

Market

,

Market inefficiency

,

Market opening

,

Market return

,

Market-share weighted index

,

Market surveillance

,

Market-value weighted index

,

Market Volatility Index

,

Maximum price fluctuation

,

Mixed market

,

Money flow

,

Net profit

,

Net profit margin

,

Near money

,

Negotiable certificate of deposit

,

Negotiable Order of Withdrawal

,

NOW

,

National Market System

,

New York Stock Exchange

,

Nominal rate

,

Notice of Sale

,

National Association of Securities Dealers

,

National Association of Securities Dealers Automated Quotations system

,

No limit order

,

No quote

,

NAPM index

,

National Futures Association

,

New York Futures Exchange

,

Normal market

,

Nikkei Index

,

No-Fault

,

Nonvoting stock

,

No-Action Letter

,

Null and void

,

No-lien affidavit

,

Notice of Default

,

No-load

,

Naked put

,

Non-qualified stock option

,

Non-statutory stock option

,

National Association of Real Estate Investment Trusts

,

Normal retirement age

,

Nasdaq Small Cap Market

,

No-load stock

,

Narrow market

,

Nasdaq Composite Index

,

National Market Advisory Board

,

Negative Volume Index

,

Negotiated market

,

Net transaction

,

No book

,

Nonaccredited investor

,

NYSE Composite Index

,

Off the books

,

One time charge

,

Operating costs

,

Original cost

,

Other current assets

,

Other long term liabilities

,

Office of Thrift Supervision

,

Offering price

,

Out-of-favor

,

Over-the-Counter

,

On-floor order

,

On margin

,

Or better

,

Operating profit margin

,

Other income

,

Open market operation

,

Operating rate

,

One-share one-vote rule

,

Optionable stock

,

Original issue stock

,

Opinion of title

,

On account

,

On-the-spot loan

,

Opening transaction

,

Option contract

,

Option price

,

Options Prices Reporting Authority

,

Out of the money

,

Own

,

Old age, survivors, and disability insurance

,

On-balance volume

,

Odd lot buy/sell ratio

,

On close

,

One man picture

,

On open

,

On the opening

,

Open market

,

Operationally efficient market

,

Outside market

,

Pooling of interests

,

Pre-depreciation profit

,

Pre-tax profit margin

,

Profit

,

Profit and loss statement

,

Profit margin

,

Pro forma

,

Pass-through coupon rate

,

Payment-in-kind security

,

Price Value of a Basis Point

,

Put bond

,

Put provision

,

Payment for order flow

,

Preferred stock

,

Prior preferred stock

,

P&L

,

Profit warning

,

Provision for income taxes

,

Price index

,

Producer Price Index

,

Parity price

,

Physical market

,

Price limit

,

Portfolio manager

,

PPO

,

Primary market

,

Public offering price

,

Power of Attorney

,

Prime rate

,

Prioritization of debt

,

Purchase-money mortgage

,

Private Market Value

,

Prime rate fund

,

Pure index fund

,

Price spread

,

Protective put

,

Protective put buying

,

Put

,

Put option

,

Put swaption

,

Put warrant

,

Profit-sharing

,

Prudent Expert Act

,

Paid-in capital

,

Paid-in surplus

,

Passive investor

,

Percent held by institutions

,

Private Investment in Public Equity

,

Perfect capital market

,

Preservation of capital

,

Program

,

Program trading

,

Put ratio backspread

,

Point-and-figure chart

,

Profit ratio

,

Painting the tape

,

Paper profit

,

Paper trading

,

Positive Volume Index

,

Price range

,

Price-weighted index

,

Profit-taking

,

Put/call ratio

,

Qualified institutional investor

,

Replacement cost

,

Reports and Records

,

Retention rate

,

Return of capital

,

Return on Capital

,

Return on Invested Capital

,

Return on Total Assets

,

Run rate

,

Real interest rate

,

Rate covenant

,

Redemption price

,

Reading the tape

,

Real-time trade reporting

,

Regulation D

,

Regulation G

,

Regulation T

,

Regulation U

,

Round of funding

,

Rules of Fair Practice

,

Rate of exchange

,

Reciprocal of European terms

,

Real economic growth rate

,

Retail Price Index

,

Retail sales index

,

Replacement cost insurance

,

Restricted stock

,

Regulation A

,

Right of first refusal

,

Right of rescission

,

Right to Know

,

Rate-improvement

,

Rate lock

,

Renegotiable rate

,

Revolving line of credit

,

Right of recourse

,

Rule of 78

,

Reversal arbitrage

,

Rent

,

Rent control

,

Right of redemption

,

Retirement Equity Act of 1984

,

Risk arbitrage

,

Riskless arbitrage

,

Relative Strength Index

,

Return on Capital Employed

,

Rising bottoms

,

Rate of return

,

Realized profit

,

Real rate of return

,

Real-time

,

Retail investor

,

Selling, General and Administrative Expenses

,

SG&A

,

Savings and Loan

,

Sight letter of credit

,

S&L

,

Stock association

,

Secondary market

,

Securities and Exchange Commission

,

Sell

,

Selling flat

,

Series EE bond

,

Spot rate

,

Stock buyback

,

Securities Investor Protection Corporation

,

Segregation of securities

,

Selling group

,

Sell limit order

,

Sell order

,

Sell plus

,

Sell-side analyst

,

Sell the book

,

Specialist unit

,

Stock loan

,

Stop price

,

Syndicate manager

,

Second preferred stock

,

Stock dividend

,

Savings rate

,

Standard of living

,

Swap rate

,

Selling hedge

,

Settlement price

,

Single stock futures

,

Spot market

,

Spot price

,

Spot trading

,

Second-to-die insurance

,

Stock life insurance company

,

Secondary stock

,

Stock bonus plan

,

Stock certificate

,

Stock Clearing Corporation

,

Stock consolidation

,

Stock exchange

,

Stock index

,

Stock market

,

Stock option

,

Stock option plan

,

Stock power

,

Stock screening

,

Stock swap

,

Stock symbol

,

Stock ticker

,

Subscription price

,

Statute of Limitations

,

Sale and leaseback

,

Satisfaction of debt

,

Secondary mortgage market

,

Start rate

,

Staggered board of directors

,

Stock fund

,

Selling the spread

,

Short market value

,

Strike index

,

Synthetic put

,

Synthetic stock

,

Special use property

,

Savings Incentive Match Plan for Employees

,

Share price

,

Split-adjusted price

,

Stock list

,

Story stock

,

Selling short

,

Selling short against the box

,

Shorting against the box

,

Structured portfolio strategy

,

S Corporation

,

Short-term gain or loss

,

Sin tax

,

Standard mileage rate

,

Subchapter M

,

Subchapter S Corporation

,

Schedule C

,

Securities Act of 1933

,

Securities Acts Amendments of 1975

,

Securities Exchange Act of 1934

,

Seek a market

,

Small investor

,

Smart money

,

Sophisticated investor

,

Specialist market

,

S&P phenomenon

,

Stop and reverse

,

Suspended trading

,

Times interest earned

,

Total cost

,

Transaction

,

Time deposit

,

Time draft

,

T-Bill

,

Term to maturity

,

Trading

,

Take a position

,

Time order

,

Trading authorization

,

Two-sided market

,

Two-way market

,

Trailing P/E

,

Tight money

,

Trading range

,

Total return index

,

Treasury Stock

,

Tenancy by the entirety

,

Teaser rate

,

TED spread

,

Time note

,

Treasury index

,

Truth in Lending

,

Time spread

,

Tenancy at will

,

Time-sharing

,

Top hat plan

,

The Street

,

Time stop

,

Timing the market

,

Tax identification number

,

Taxpayer Relief Act of 1997

,

Tax Reform Act of 1986

,

Tax Reform Act of 1993

,

Trading profit

,

Trading Index

,

Take a bath

,

Target price

,

Thin market

,

Third market

,

Tight market

,

Trading costs

,

Trading curb

,

Trading floor

,

Trading halt

,

Trading session

,

Trading volume

,

Transparent market

,

U.S. Government Agency Security

,

U.S. Savings Bond

,

U.S. Treasury

,

U.S. Treasury Bill

,

U.S. Treasury Bond

,

U.S. Treasury Note

,

U.S. Treasury Securities

,

Unit

,

Uniform Securities Act

,

Unlisted trading

,

Unappropriated profit

,

Unemployment rate

,

Uncovered put

,

Unit Investment Trust

,

Unit Trust

,

Unit of trade

,

Unit of trading

,

Unrealized profit

,

Variable rate

,

Value stock

,

Vetoing stock

,

Voting stock

,

Williams Act

,

Whisper number

,

Wage price spiral

,

Waiver of premium

,

Watered stock

,

Widow-and-orphan stock

,

W-2 Form

,

W formation

,

Weak market

,

When, as, and if issued

,

Wide market

,

Wilshire 5000 Equity Index

,

X or XD

,

Year-To-Date

,

Yankee bond market

,

Yield to call

,

Yield to maturity

,

Yield to worst

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Y shares


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