Futures also have time-decay, right?

[prince-in-jail]

Futures price fair value = I + FC - DY

where I = stock index, FC = financing cost, DY = dividend yield

Thus, if the current level of the index is 100, the annual financing cost is 12 percent, and the dividend yield is 8 percent, the fair value of the futures price with 3 months (one-forth of a year) to maturity will be 100 + (1/4) * 100 * (0.12 - 0.08) = 101. Similarly, the fair value of the futures price with 6 months to maturity will be approximately 102 and the 9-month fair value approximately 103.

 

[HotTip]

Quote from HotTip:

with little to no time decay you could beat the market by buying a couple of ES contracts to match your account size and then use the remainder to invest in safe fixed income assets (e.g., I don' t know how "safe" it is, but Interactive Brokers private placements currently yield 7%).

I just realized the fallacy of this strategy -- taxes. Buying and holding the SPYs is much more tax efficient than rolling ES futures every 3 months. It would only work if you could do it in a tax-deferred account. Question is, can you buy futures in a retirement account, since it's considered a margined asset?

 

[TraderZone]

Quote from HotTip:

I just realized the fallacy of this strategy -- taxes. Buying and holding the SPYs is much more tax efficient than rolling ES futures every 3 months. It would only work if you could do it in a tax-deferred account. Question is, can you buy futures in a retirement account, since it's considered a margined asset?

Yes. If you are a US citizen, it must be held through a trust company. Many futures brokers work with the 1 or 2 trust companies that specialize in this.

I know of two, but one held 50% of your money back! This one (the biggest I think), only holds about $500 or so:

mTrustCompany.com

There are modest quarterly fees with all of them. Start with your broker(s) about this. They should be able to tell you what to do.