You believe that the spread between the September S&P 500 future and S&P 500 index is too large and will soon correct.This is an example of ______________.

Question

Quizplus · Accepted Answer

This is an example of a convergence play, which involves taking advantage of pricing discrepancies between a futures contract and its underlying asset. In this case, the belief is that the spread will narrow over time, leading to profits for the trader. Pairs trading involves trading two related securities against each other, statistical arbitrage involves exploiting statistical relationships between different securities, and a long/short equity hedge involves taking long positions in some stocks and short positions in others to hedge against market risk.

You Believe That the Spread Between the September S&P 500