/ES contango question
- Thread starter raf_bcn
- Start date
I don't see no "contango"...
Robert Morse
Sponsor
Must be some dividends flows in December before expiration. I'm not an expert on this.
Robert Morse
Sponsor
March is higher than DEC right now. Very little, but higher.
ES has rallied, which lowers dividend yield. And interest rates have risen. So the gap between has shrunk to ≈zero.
I tried to arb the ES years ago. No joy. (That was when the diff ran 10 points or so... can't imagine arbing working when there is such a small spread.... but I could be wrong.)
The "apparent" arbable diff back then turned out to be illusionary when it came to execution.
I can see the Dec - Mar effect and it's curious... Not sure it's significant, since it's so small.
Interest rates slightly up? And, the future has a delta higher than 1... because of the interest. So if projected dividends stay the same in dollar terms, the future outperforms the spot slightly when we move up. Together with maybe a small rise in rate...
A rise in rate of 10 bp is about 0.20 in the 1-month future, 2.5 points in 1-year.
And the move from 2450 to 2550 means a 1-year future goes up by an extra 1.25 points compared to spot, assuming 1.25%. (Basically, the 1-year future has a delta of 1.0125)
A rise in rate of 10 bp is about 0.20 in the 1-month future, 2.5 points in 1-year.
And the move from 2450 to 2550 means a 1-year future goes up by an extra 1.25 points compared to spot, assuming 1.25%. (Basically, the 1-year future has a delta of 1.0125)