Outperform the S&P

T

Trend Fader

Assuming one has $100k in their portfolio. Cant you just buy $100k worth of ES futures on margin and take the remainder of cash and invest in short term yields.. woudlnt this guarantee a % performance better than the S&P index??

What am i missing?

--MIKE
 
The ES is priced to underperform the S&P by the amount that you gain based on the cash investments.

It is arbitraged to that level.
 
Yup, that's what essentially the $Premium of the futures contract is...the short term interest.


Quote from MorganSys:

The ES is priced to underperform the S&P by the amount that you gain based on the cash investments.

It is arbitraged to that level.
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Quote from risktaker:

Yup, that's what essentially the $Premium of the futures contract is...the short term interest.
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what is the short term interest used? 3 month T bill I suppose. In times of higher long term interest rates, you could invest the cash portion in a high yield bond fund Then use a simple timing system that in itself beats the S&P or you time the market with one contract, always in the market with the second. You can vary that ratio,add a 3d or 4th contract to use leverage depending on the type of market . Just throwing around some ideas ...
 
Quote from gkishot:

But if one invests let say $10k in ES futures & other $90k in S&P 500 itself he would definetely outperform S&P 500.
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You've only increased synthetic beta through gearing. Outperforms on the upside, underperforms on the downside.
 
It's basically leveraged synthetic indexing, a few mutual funds do this quite well. 2 times upside of the S&P, but 2 times downside the other way.

Quote from riskarb:

You've only increased synthetic beta through gearing. Outperforms on the upside, underperforms on the downside.
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