Please help me understand 'cause I can't by myself-
This article:
https://www.investopedia.com/articles/active-trading/070113/using-index-futures-predict-future.asp
talks about index futures arbitrage (selling index futures and buying the underlying stocks if futures trade at a premium, or the reverse if futures trade at a discount, relating to their fair value, i.e. spot price plus interest and minus dividends lost over a certain period of time).
E.g. if futures trade at premium I sell short futures contract and I buy stocks in index; at expiration I will deliver stocks and I'll profit from difference between the value of futures contract and the value of stocks.
How can it work since the contracts are settled by cash?My counterpart doesn't accept the basket of stocks but a cash settlement.
Index arbitrage can really affect both spot price and futures price? And in this case is it possible to predict the opening direction using index futures, as it is stated in the article?
In this regard is there someone who uses also fair value in his strategy?
Thank you very much

I found in this forum a link ( Program Trading, Fair Value, Index Arbitrage Values - indexArb.com) that maybe can clarify all of my doubts.
Anyway there's a lot to study.