What Is the Primary Operational Risk for an Arbitrageur Executing a Cash and Carry Trade?

The primary operational risk is "leg risk," which is the risk that the two legs of the arbitrage trade (buying spot and selling futures) cannot be executed simultaneously or at the intended prices. This can be due to high network latency, exchange outages, or sudden market volatility.

If one leg executes but the other fails, the arbitrageur is left with a naked, directional position exposed to market risk.