medium · Market Microstructure lob
An authorized participant (AP) notices that the SPY ETF is trading at $500.50 on the NYSE Arca, while the underlying basket of stocks has a Net Asset Value (NAV) of $500.20.
Which sequence of actions will the AP take to capture the arbitrage?
- Buy the underlying stocks, create ETF shares, and sell them on the exchange.
- Sell SPY futures and buy the ETF shares.
- Short the underlying stocks and buy SPY shares.
- Buy SPY shares on the exchange and redeem them for the underlying stocks.
Sign up free to see the explanation and track your rank →
More Market Microstructure lob practice
- A stock is quoted at $50.00 bid x $50.10 ask. A buyer submit… — How does this action affec
- If the stock price drops instantly from $50.05 to $49.00 in a 'flash crash,' what happens
- Under the National Market System (Reg NMS), if Exchange A is quoting a stock at $10.00 x
- If a market sell order for 200 shares arrives at 10:00:05 AM, who receives the fill?
- A stock is trading with an NBBO of $40.00 × $40.10. A trade… — According to the Lee–Ready
- A stock is priced at $1.05. A market participant submits a q… — Why is this quote rejected
- What is the status of our limit order after the match, and what microstructure risk is the
- If a market buy for 400 shares arrives and the exchange uses 'pro-rata' matching, how many