--- title: "How does cash futures arbitrage work, and what does it earn?" description: "Cash and futures arbitrage buys the index basket in cash and sells the near month future when the future trades above its fair value by more than the costs." source_url: "https://www.rupeecase.com/learn/questions/cash-futures-arbitrage" --- The near month basis, annualised, swings most in the last days before an expiry Near month Nifty future less the index close, annualised, daily, from 1 Jul 2025 to 15 Sep 2026. The gap is before costs and funding. Source: NSE end of day data, computed by RupeeCase. As of 15 Sep 2026. The trade is simple on paper. When the near month future trades above spot by more than it costs to carry the index to expiry, you buy the basket in cash and sell the future. Both legs converge at expiry, and the gap is the earning. The chart shows the near month basis, annualised, from 1 Jul 2025 to 15 Sep 2026. Annualised basis is the gap divided by the index close, scaled to a year. It swings most in the last days before expiry, because few days are left to divide by. Read it with the days left, not on its own. A large annualised figure in the final days can reflect a small gap spread over very few days. What is earned is the basis less the costs. Costs include brokerage on both legs, the STT on the futures sale at 0.05% from 1 Apr 2026, the STT on the cash leg, exchange and SEBI fees, GST at 18% on brokerage and exchange charges, stamp duty, and the impact of buying a whole basket. The cash leg also ties up money, and its funding cost comes off too. Index arbitrage is not a single retail trade in practice. A basket of many stocks needs systems, funding and size that most individuals do not have. NSE publishes the Nifty 50 Arbitrage Index, a rule based version of this trade, as a benchmark. It is an index, not an offer. A positive basis is a fact about prices on one day. It is not a return until the costs and the funding are counted on the day the trade is placed. **Before you trade.** Derivatives trading carries a high risk of loss. SEBI's study "Profitability of Individual Traders in the Equity Derivatives Segment (FY25 to FY26)" (August 2026) found that 87.7% of individual traders in equity F&O made net losses in FY26, with aggregate net losses of Rs 91,685 crore. [Read the SEBI study](https://www.sebi.gov.in/reports-and-statistics/research/aug-2026/study-profitability-of-individual-traders-in-the-equity-derivatives-segment-fy25-fy26-_103835.html) How does cash futures arbitrage work, and what does it earn?Cash and futures arbitrage buys the index basket in cash and sells the near month future when the future trades above its fair value by more than the costs, then holds to expiry, so the earning is the basis after costs and funding. The annualised basis is a gross figure, and for a retail account the costs and the funding can take most of it. LGo deeper ## Where Learn teaches this. [Go deeperWhy futures trade above spot: basis, carry and convergence8 min, Beginner](/learn/path-13/module-13-2-futures-basis-and-carry)[Go deeperThe real cost of a trade: STT, exchange fees, SEBI fee, GST and stamp duty7 min, Beginner](/learn/path-12/module-12-6-cost-of-an-fo-trade) SSources ## Go to the source. 1. [NSE Indices, Nifty 50 Arbitrage strategy index](https://niftyindices.com/indices/equity/strategy-indices/nifty-50-arbitrage) NSE 2. [NSE circular NSE/FATAX/73524 (STT rates from 1 Apr 2026)](https://nsearchives.nseindia.com/content/circulars/FATAX73524.pdf) NSE 3. [NSE, equity derivatives contract specifications (expiry cycle, lot size and strike rules)](https://www.nseindia.com/static/products-services/equity-derivatives-contract-specifications) NSE ?Questions people ask ## Related questions. 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