Hey guys, how does "ES" continuous contract account for the fact that holding ES over time loses the interest rate? I'm backtesting on NT.
ES loses interest rate
- Thread starter EliteTraderNYC
- Start date
Do you mean dividends ? If so already accounted for, you dont lose them, otherwise there be a tremendous silly edge.
No, look: at some point u need to roll from sep to dec sell 1661.25 and buy 1654.75
E-Mini S&P 500 Sep 13 1,661.25 Aug 23 6.50 (0.39%)
ESZ13.CME E-Mini S&P 500 Dec 13 1,654.75 Aug 23 6.75 (0.41%)
ESH14.CME E-Mini S&P 500 Mar 14 1,648.50 Aug 23 7.00 (0.43%)
ESM14.CME E-Mini S&P 500 Jun 14 1,638.00 Aug 23 3.00 (0.18%)
E-Mini S&P 500 Sep 13 1,661.25 Aug 23 6.50 (0.39%)
ESZ13.CME E-Mini S&P 500 Dec 13 1,654.75 Aug 23 6.75 (0.41%)
ESH14.CME E-Mini S&P 500 Mar 14 1,648.50 Aug 23 7.00 (0.43%)
ESM14.CME E-Mini S&P 500 Jun 14 1,638.00 Aug 23 3.00 (0.18%)
?..... I believe "losing the interest rate" is offset by the price difference between the deferred contract and the spot contract. If the ES were to "sit still" for 3 months, December would be expected to rally from ~1654.75 up to the current, September contract, spot price, ~1661.25. That gain ought to approximately offset that loss.
ES has been backwardated because of ZIRP. The dividend yield exceeds the interest cost, so ES carries positively.
Thanks for the explanation guys, this makes sense, of course this means if you go short, you lose a small amount per quarter.
Same if you shorted spx or the underlying basket.