Let’s assume on PSX we have stock A, which is trading at Rs 100, both in spot and futures market, within next three months it can be in the range of Rs 90 and Rs 110. We also know that in PSX market we can also use (Spot) underlying and Futures markets. In three months it goes to 110 and then to 90 then to 110 again back to 90 and finally it closes at 110. You need to define a strategy in the beginning to maximize your profit what you would do and what would be the profit.

Answer rating: 100% (QA)

Investor must be one hundred sure about increase and decrease in share price then we will do two ... View the full answer