NISM Certifications · NISM-Series-XV: Research Analyst · Fundamental Analysis of Commodities
A cotton trader buys 100 bales in the spot market at ₹55,000 per bale and simultaneously sells futures for delivery in 3 months at ₹57,500 per bale. Financing, storage and insurance cost ₹1,800 per bale for the period. Assuming delivery at the futures price, what is the arbitrage profit for the entire position?
Profit per bale is the futures price ₹57,500 minus spot ₹55,000, which is ₹2,500, less carrying costs of ₹1,800, leaving ₹700. Across 100 bales the cash-and-carry arbitrage earns ₹70,000.
- A₹2,50,000
- B₹70,000Correct
- C₹1,80,000
- D₹4,30,000
Explanation
Gain per bale = 57,500 − 55,000 = ₹2,500. Less carrying cost ₹1,800 gives ₹700 per bale. For 100 bales profit = ₹70,000. Option 0 ignores the carrying cost. Option 3 adds the cost instead of subtracting it.
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