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I found that for the exchange traded Futures, we can deliver the Futures before the last trading day, namely you can sell a Future then deliver it immediately, which definitely has a arbitrage opportunity if spot price and Future price are different.

So do I misunderstand some rules of exchanged Futures?

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  • $\begingroup$ I think we should clarify some things first, to ensure that we do not mess up things. Futures as standardized forward contracts could be traded over an exchange at any time as long as you find a buyer. The future itself could be delivered (transferred) immediately or usually within 3 bank days. However this does not mean that the underlying is (physically) delivered. This is possible on expiry only (in contrast to options). Considering this, I do not see the arbitrage opportunity you mentioned. But maybe I missunderstood your question? $\endgroup$ – Fokko Mar 19 at 14:05
  • $\begingroup$ Usually there is a Delivery Period (more than one day long) when the contract approaches expiration, where you can deliver. The Exchange allows this so that convergence of future price to spot can take place ahead of expiration, while the exchange monitors the situation. They don't want any "surprises" on the last day of trading. $\endgroup$ – Alex C Mar 19 at 23:06
  • $\begingroup$ @Fokko Here i mean the underlying delivery but not the offset of position. For the arbitrage, if Future price > spot price, you can sell a Future and buy a spot, then delivery it immediately, otherwise you can do the reverse way. $\endgroup$ – user6703592 Mar 20 at 8:36
  • $\begingroup$ @user6703592 This is not the way it works as a future is a contract of two parties: the long position holder and the short position holder. The seller has the obligation to deliver (in your example you are the seller) and the buyer to buy. So if you sell your future as a short position holder the new owner of the short position steps into your legal position and is obliged to deliver. Your example implies that you are long and short position holder at once - so leaving your long position and then deliver from your short position. This is in fact not possible. $\endgroup$ – Fokko Mar 21 at 10:23
  • $\begingroup$ @Fokko I may confuse with short position and seller. Ok how about if Future price > spot, you borrow money to buy a spot and enter a short position of Future. Then deliver Future immediately, you deliver the spot and receive the money(=Future price), then you repay the money( =spot )you borrow. Finally you make the profit. $\endgroup$ – user6703592 Mar 21 at 13:43

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