PFA_Futures-Spot Divergence Indicator

PFA Futures-Spot Divergence Indicator™

The PFA Futures-Spot Divergence Indicator™ is a proprietary analytical tool designed to provide traders with real-time insights into the pricing gap between futures contracts and their underlying spot indices. By measuring the premium or discount for key indices, the indicator highlights potential market sentiment, arbitrage opportunities, and short-term positioning pressure.

Unlike conventional indicators that focus on price trends alone, this tool emphasizes inter-market dynamics, showing how futures are behaving relative to the cash market. It calculates the differential for selected indices and visualizes it via:

Line plots: showing the live futures-spot gap

Color-coded zones: highlighting premium (positive) vs discount (negative)

Dashboard values: indicating the exact spread and relative intensity

Key Benefits:

Detect market overbought/oversold conditions due to excessive premium or discount

Identify potential arbitrage or rollover opportunities

Gauge market participant sentiment in real time

Complement trend, momentum, and volatility strategies

Use Cases:

NIFTY, BANKNIFTY, and other major Indian indices

Short-term trading and hedging strategies

Risk management and intraday market positioning

Disclaimer: The indicator is for analytical and educational purposes only. It does not provide buy/sell signals or guarantee future returns. Traders should apply independent judgment and proper risk management before taking positions.