You can get historical Fair Value here. Neat site with lots of info.
http://www.allstocks.com/html/fair_value_history.html
http://www.allstocks.com/html/fair_value_history.html
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s&p premium
- Thread starter dividend
- Start date
Quote from ktm:
FHL,
If it weren't tied, then it wouldn't be arbing. No?
Equity futures contract value has to and will converge to cash when the Futures contract goes off the board (expiration) .. In the meantime, theoretically they are related by interest rates and dividends (see link below for equation). However, when trading, for various reasons, they can and will deviate from this relationship and that's when the arbs step in.
Here is another link to get daily futures fairvalue premiums...
http://www.indexarb.com/fairValueDecomposition.html
ok thanks for that (those) link(s). I think i read that a year or two ago but it didnt make any sense to me then, but it does now. lol, go figure...
basically, the cash and futures should be trading the same, but when they diverge, programs enter to arb it... the premium indicator is important to know the hypothetical triggers when the progs might kick in...
ok that makes sense... so anyone know why the ranges have been exanding so much the past two+ years?
im looking for the chart of the premiums i had this morning but cant find it at the moment...
basically, the cash and futures should be trading the same, but when they diverge, programs enter to arb it... the premium indicator is important to know the hypothetical triggers when the progs might kick in...
ok that makes sense... so anyone know why the ranges have been exanding so much the past two+ years?
im looking for the chart of the premiums i had this morning but cant find it at the moment...
Quote from dividend:
ok thanks for that (those) link(s). I think i read that a year or two ago but it didnt make any sense to me then, but it does now. lol, go figure...
basically, the cash and futures should be trading the same, but when they diverge, programs enter to arb it... the premium indicator is important to know the hypothetical triggers when the progs might kick in...
ok that makes sense... so anyone know why the ranges have been exanding so much the past two+ years?
im looking for the chart of the premiums i had this morning but cant find it at the moment...
what do you mean by "ranges have been expanding ... " what range are you talking about?
with the risk of repeating myself...
cash and futures should be the same at expiration but not before..
there are still 91 days to go before jun s&p expires.
Currently Jun S&P500 future has a fair value premium of 10.45 (=interest on index - dividends)...this premium will go down to zero over time by June expiration
theoretically,
tomorrow, if cash is at 1300, jun futures should be at 1310.45 ...if they deviate, arbs should step in...I say theoretically because the arb may remain open at times but should and will ultimately get closed.
Quote from newbunch:
If I understand the question correctly..... Because the interest rate has gone up, thus increasing the futures premium over cash.
yes it makes sense...
for today's june ES future, interest component = 16.14
and dividend component = 5.69
hence, FV premium = 10.45
if interest rates were half of today's, then this premium would have been 8.07 less (=2.38) instead of 10.45.
Oh, if it were only 2003 again when you could buy the S&P futures at a discount to cash.... You got paid to be long and the market were moving up. That was a good year, easy to make money.Quote from lynx2004:
yes it makes sense...
for today's june ES future, interest component = 16.14
and dividend component = 5.69
hence, FV premium = 10.45
if interest rates were half of today's, then this premium would have been 8.07 less (=2.38) instead of 10.45.
I know that this subject has been discussed on ET, but I see little evidence that traders use PREMS on the ES unless you assume that every comment is attached to a User.
Being basically a simple man, I just wait at the Time & Sales gate and watch what comes through, but if there is a case for PREMs then I would consider it.
Just interested in User comments.
Being basically a simple man, I just wait at the Time & Sales gate and watch what comes through, but if there is a case for PREMs then I would consider it.
Just interested in User comments.