Basis refers to the spread between spot price and futures price, so the change of basis reflects the relative trend of spot price and futures price. The change of basis will have a certain impact on the effect of hedging, which is usually called basis risk. To this end, arbitrageurs need to form a certain risk awareness. Under the premise of controllable cost, we should try our best to improve the fitting degree of stock portfolio to the Shanghai and Shenzhen 300 Index and do a good job in fund management of futures positions, so that spot arbitrage trading of stock index futures can truly become a "risk-free" profit way.
2. Risk of tracking error
The stock portfolio usually does not match the index portfolio completely. First of all, due to the large sample of the Shanghai and Shenzhen 300 Index, it takes a lot of money to construct the corresponding stock portfolio. Secondly, according to the principle of weight matching, it is usually less than one hand (100 shares) when opening a position. In addition, when arbitrageurs arbitrage in the forward direction, if they encounter the daily limit or suspension of a certain heavyweight, they must adjust the composition of the group ticket. Therefore, the stock portfolio is usually inconsistent with the index composition, thus forming a certain tracking error.
3. Risk of compulsory liquidation
When we look at the futures market, the risks brought by the establishment of future positions can not be ignored. Because of the leverage mechanism and forced liquidation system of futures trading, arbitrageurs are likely to face the risk of forced liquidation. For example, after arbitrageurs carry out forward arbitrage (buying spot and selling futures), the index converges upwards. At this point, the spot position is profitable, and future positions is losing money. Although the sum is profit, the future position of the arbitrageur is at a disadvantage. If the index continues to rise, arbitrageurs need to add full margin, otherwise they may be forced to close their positions.
4. Impact cost risk
When constructing stock spot portfolio, there may be a certain impact cost, that is, when calculating arbitrage, the transaction price is higher than (when buying) or lower than (when selling short) the stock price, thus causing a certain deviation in the index and affecting the arbitrage income. In fact, arbitrageurs often estimate the impact cost to broaden the scope of no arbitrage. However, the prediction accuracy of impact cost is still highly related to arbitrage decision-making, which shows that some arbitrage opportunities are missed or the profit after arbitrage is negative.