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At 1:07 PM -0700 8/2/00, Carroll Slemaker wrote:
>The value reported at this site is from the same source as for the
>previously mentioned site. Therefore, my previous comments apply equally to
>this site - the value differs from that reported by Bloomberg and cannot be
>derived using the formula quoted by the CME and others.
Fair Value is equal to the value of the S&P 500 Index, plus interest
until the contract expiration, minus the dividends you would have
gotten on the S&P 500 stocks. Premium is the difference between the
Fair Value and the Index. The TV usually reports the premium and
calls it the Fair Value.
The interest term is pretty consistent but the dividend term can
vary. Most people just prorate the average dividends over time while
others may figure the actual timing of the dividends in their
calculations. The latter is obviously more accurate if you are
looking for arbitrage opportunities.
If you are comparing the Fair Value with the Index at the close of
the day you get an additional variable. Since the stock market closes
at 4:00 PM and the futures market closes at 4:15 PM (Eastern time), a
lot can happen in those 15 minutes. This introduces a third term. And
remember that the official closing price is not the value of the last
tick, making things even more difficult.
Bob Fulks
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