Why are Sept futures trading lower than June?

C

cunparis

I was going to rollover a short ES position but I didn't understand why September is 4 pts under June. In the past I've seen the later contract selling higher than the expiring contract, but this isn't the case now.

Could it be that people expect the market to go down by September so it's in less demand? Or people expect the ES to go up next week so they are holding out to sell?
 
You'll also notice June futures are at a discount to the index. Yes it's rare.

The reason has nothing to do with sentiment or future expectations of direction. The spread and the basis are simple mathematical formulas.

Right now it is more advantageous for a long to buy stocks and collect dividends than to margin futures on the cheap and invest the remainder in short term interest bearing securities.
 
Quote from jeb9999:

Please educate yourself on the basics of index futures premiums.

http://www.indexarb.com/
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Thanks for the link, can you give a resume? It is a bit intimidating.

I was a bit disappointed when I went to roll over this morning and saw that I was going to lose 4 pts on my ES shorts. So I decided to wait. I don't have a lot so liquidity isn't a problem although I didn't want to lose more on a wider spread.

So I waited but when it went up to 950 I could resist so i shorted the September contract but held my June contracts. Now I'm showing a profit on the September and I'm wondering if I should close out the June? I essentially got a free rollover.

With today's close I'm convinced even more we're headed down.

Also Max pain for SPY is 82 or 90 (depending on the data source). I'm not sure if that is going to influence the S&P or not. Any ideas?
 
Quote from MTE:

Cost of carry - interest rates are at zero, dividend yield is not.
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Ok this makes sense. I knew this played a role in currency futures but didn't really think about it for index futures. Thanks.
 
Quote from cunparis:

Ok this makes sense. I knew this played a role in currency futures but didn't really think about it for index futures. Thanks.
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Yeah, cost of carry is present in all futures.
 
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