If a stock index futures contract is overpriced,you would exploit this situation by:

Question

Quizplus · Accepted Answer

Selling the overpriced futures and simultaneously buying the stocks in the index would allow you to profit from the price discrepancy between the futures and the underlying stocks. This strategy is known as arbitrage and aims to take advantage of any mispricing in the market. Option A and D involve selling stocks, which could result in additional transaction costs and may not necessarily be profitable in an overpriced market. Option C would involve buying both the futures and stocks, which could lead to a potential loss if the futures contract continues to be overpriced. Therefore, option B is the best choice for exploiting an overpriced stock index futures contract.

If a Stock Index Futures Contract Is Overpriced,you Would Exploit