index arbitrage

index arbitrage definition - finance
The simultaneous purchase of stock index futures and the sale of some or all of the component stocks that make up the particular stock index, or the sale of the index futures and purchase of the stocks. The trading intention is to profit from sufficiently large intermarket spreads between the futures contract and the index itself.

Webster's New World Finance and Investment Dictionary Copyright © 2003 by Wiley Publishing, Inc., Indianapolis, Indiana.
Used by arrangement with John Wiley & Sons, Inc.

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