If you determine that the S&P 500 Index futures is overpriced relative to the spot S&P 500 Index, you could make an arbitrage profit by

Question

Quizplus · Accepted Answer

To exploit the overpricing of S&P 500 Index futures relative to the spot S&P 500 Index, one would sell the overpriced futures (to benefit from their expected decline to the fair value) and simultaneously buy the underlying stocks in the S&P 500 at the current lower spot price. This strategy locks in a risk-free profit as the futures price converges to the spot price.

If You Determine That the S&P 500 Index Futures Is