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I am currently holding a stock.

I can see that the stock is trading at slightly above the future price.

I don't expect it to pay any dividend for a while.

Are there reasons that I should not sell my stock and then buy the future contract to retain my position? Assume I don't want to change my position.

I am trading in HK market if that matters.

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  • $\begingroup$ transaction cost, also how far in the future are you comfortable with? which stock is this if I may ask? $\endgroup$ – John Jul 7 at 1:12
  • $\begingroup$ @Jonat thanks, 2382 HK $\endgroup$ – Preston Lui Jul 7 at 3:27
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    $\begingroup$ check borrow rate you can get on this stock (some brokers let you lend your stocks) $\endgroup$ – alexprice Jul 7 at 12:18
  • $\begingroup$ @alexprice Indeed, my broker allowed me to join an automatical stock lending program. It automatically lends my stock to shorter and earns me a borrowing rate. So far my stocks aren't lent though. $\endgroup$ – Preston Lui Jul 7 at 14:32
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you should estimate cashflows in both cases, and to see what is more advantageous for you. The cashflows are:

1) borrow rate cash if your stock is lent
2) interest rate cost if you intend to hold for a long period
3) potential dividends (if your holding period encompasses ex-div date)
4) cost of rebalancing future position if you intend to have exposure encompassing several future rolling dates

You could also consider deep in-the-money call (you would have leveraged stock position then).

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  • $\begingroup$ In other words, the extra advantage of holding a stock is that it enables me to lend it to others for shorting? $\endgroup$ – Preston Lui Jul 8 at 1:35

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