# Delta one trading: dependence on repo rate?

I have heard a delta-one trader mentioning the dependency of its activity on interest rates, dividend yields and repo rates.

While I can understand the exposure he has to interest rates and dividend yields through the trading of futures contract, as per the formula of the futures price:

$$F(t,T) = S_t \times e^{(r-q)(T-t)}$$

where $$S_t$$ is the spot price at time $$t$$, $$r$$ is the interest rate, $$q$$ is the continuous dividend yield and $$T$$ the maturity of the contract, I can't see where the repo rate dependence is coming from.

Is it coming from the margin requirements? Like for example if you were to post margins on this position, you would earn the interest rate (the repo rate?) on the margins you have posted at the broker's?

• Thanks, that helps clarifying! But then in which case/for which underlying the repo rate IS NOT the interest rate $r$? – JejeBelfort Oct 2 '19 at 6:29
• From the theoretical point of view it is always the repo rate for the specific stock in question that should be used as $r$. Use other short term rates (FF, REPO-GC, SOFR) only as an approximation. – Alex C Oct 2 '19 at 17:37