Newbie question re: backwardation/contango

J

jalexander

When I'm reading about futures most books etc advise on always trading the front month. The month with most volume.

But lets say you wanted to open a long term long position in the es. Would you buy the front month sept 15 @ 2089.75.... or buy the next month december 2015 @ 2065.75.

JsgnlHH.png


Is there a reason you'd buy the september contract and roll it over the december, by which time, ceteris paribus, surely the december contract would have converged higher?

Thanks in advance.
 
Last edited:
jalexander said:
Is there a reason you'd buy the september contract and roll it over the december, by which time, ceteris paribus, surely the december contract would have converged higher?
More...

Your call.

I see the most risk in the word "surely."
 
InfoTech said:
Your call.

I see the most risk in the word "surely."
More...

Well my point was theoretically assuming no change in the s&p index.

Can anyone offer insight why the ES is in backwardation not contango? I would have assumed the future months would be higher even with today's interest rates.
 
jalexander said:
Well my point was theoretically assuming no change in the s&p index.

Can anyone offer insight why the ES is in backwardation not contango? I would have assumed the future months would be higher even with today's interest rates.
More...

Have you considered reading material on the basics of index futures before assuming things about them ?

The stocks in the index pay dividends and longs of the index futures don't get those dividends.

If you go long SPY you get to collect the index dividends and don't have to do a rollover every quarter.
 
jeb9999 said:
Have you considered reading material on the basics of index futures before assuming things about them ?

The stocks in the index pay dividends and longs of the index futures don't get those dividends.

If you go long SPY you get to collect the index dividends and don't have to do a rollover every quarter.
More...

Yes, appreciate the answer notwithstanding the first line.
 
You must log in or register to reply here.
Back
Top