Advanced Arbitrage Track
Deep-dive into cash-futures, options arb, index and statistical models with live execution sessions, algo tooling, and mentor-driven trade reviews.
How Arbitrage Works in the Indian Stock Market
A practical guide to common arbitrage models, execution realities, and how supervised live-market exposure and academy-supported risk management turn opportunities into repeatable workflows for traders.
Arbitrage is the practice of capturing price differences between markets or instruments. In its purest form it seeks price convergence and aims to generate returns from inefficiencies rather than market direction.
This article explains cash, futures, options and statistical arbitrage, and outlines the operational, technology and risk controls required to execute these strategies at scale.
What is arbitrage in the stock market?
Arbitrage involves simultaneously buying and selling the same or equivalent asset across markets to capture a price gap. The profit equals the spread after transaction costs and fees are accounted for.
Simple cash arbitrage looks like buying a stock on one exchange and selling it on another when the quoted prices differ. More advanced forms use futures, options, or algorithmic pairs to extract consistent, low-directional exposure.
Why arbitrage exists in India
The Indian market ecosystem includes multiple exchanges, varied liquidity pockets, and rapid but imperfect information flows. These features create short-lived pricing gaps that skilled traders and systems can exploit.
Factors that create arbitrage opportunities include exchange-specific liquidity patterns, futures mispricing, option-premium differences, and temporary mismatches caused by news, settlement timing, or latency between platforms.
Common arbitrage models
- Cash–Futures Arbitrage: Buy the cash (spot) instrument and sell a futures contract when the futures trade at a premium that covers costs.
- Options Arbitrage: Use relative mispricing between options and the underlying or between option strikes to build risk-defined trades.
- Inter-exchange Arbitrage: Exploit price differences for the same instrument listed on different platforms.
- Index Arbitrage & Basket Trades: Trade index component mispricing vs the index or exchange-traded products.
- Statistical Arbitrage: Quant-driven pair trades that profit from mean reversion in correlated instruments.
Execution realities and challenges
Arbitrage often looks simple on paper but requires precision in execution. Slippage, transaction costs, exchange fees, stamp duty, and short-lived spreads can erode theoretical edges.
Speed and automation matter. High-quality market data, low-latency order routing, and pre-trade checks are essential to capture tiny spreads reliably. For retail traders, access to institutional-grade tools and supervised workflows narrows the gap to professionals.
Regulatory and tax considerations also affect net returns. Traders must understand settlement cycles, margin obligations, and tax reporting for short-term trading strategies to avoid surprises at scale.
How Trading Shastra teaches arbitrage responsibly
We teach arbitrage as a repeatable process that combines strategy, technology and controls. Lessons emphasise pre-trade economics, execution playbooks, and post-trade reconciliation so learners grasp true profit after costs.
Students trade under supervised live-market exposure with algorithmic assistance and mentor review. Academy-supported risk management frames position limits, capital allocation, and contingency actions during the live-training phase.
Practical modules include real-time arb scanners, latency testing, order-splitting, margin optimisation, and scenario drills — all practiced in live sessions with oversight rather than pure paper exercises.
Scaling arbitrage and career relevance
Arbitrage can scale from small, repeatable spreads to larger program-based allocations as systems and risk controls mature. Scaling requires rigorous track records, strict cost management, and automated monitoring to preserve edge as volumes grow.
For learners, arbitrage skills translate well to roles in prop desks, algo trading, and quant research. The discipline of measuring real net returns, controlling slippage, and automating checks builds a career-ready skillset.
Programs & practical support
Trading Shastra offers tiered programs focused on operational readiness: strategy design, technology integration, supervised live-market exposure, and internship pathways. Eligible participants may access program-based allocation and join a structured profit-share model, subject to terms.
Execution & Technology Track
Focus on automation, latency optimisation, pre-trade economics, and post-trade reconciliation — designed for traders building scalable arb workflows.
Request official program materials for timelines, eligibility, and the scope of academy-supported risk management during the live-training phase.
Frequently asked questions
- Is arbitrage trading legal in India?
- Yes. Arbitrage is a legitimate and widely used trading approach in regulated markets. Traders must follow exchange rules, margin protocols, and tax requirements.
- Do I need large capital to start?
- Not necessarily. Learning can begin with smaller, risk-defined trades and scale with disciplined performance and program-based allocation during the live phase. Program materials describe allocation and eligibility.
- How quickly do arbitrage opportunities disappear?
- Many spreads are short-lived — measured in seconds to minutes. That's why speed, automation, and proactive monitoring are crucial to converting opportunities into reliable results.
- What are the main costs that reduce arbitrage returns?
- Transaction fees, exchange levies, stamp duty, bid-ask spread, slippage, and margin financing costs all reduce net profit. Effective arbitrage requires modelling these costs before executing trades.
- Can beginners learn arbitrage strategies?
- Yes — when taught with operational focus: pre-trade checks, execution playbooks, algorithmic assistance, and supervised live-market exposure. Trading Shastra emphasises hands-on practice with mentor oversight and academy-supported risk management.
Contact & next steps
To receive program materials, execution playbooks, or to book a discovery call, contact our admissions team. We’ll share eligibility criteria, timelines, and the supervised live-trading framework used in training.
Address: B-11, Sector 2, Noida – 201301
Phone: +91 97173 33901 • Email: info@tradingshastra.com
All live trading is conducted under academy supervision within defined risk parameters. Program terms and eligibility apply. See program materials for full terms and conditions.
