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Dan Tillemans wrote:
> Traders,
>
> Is there a place to find the fair value for the NASDAQ 100 leading month
> futures contract each day? (As calculated by some reliable source.)
>
> I have located the formula at the CME website, but this looks pretty
> intensive to keep up with each day with the dividends, etc:
> http://www.cme.com/e-nasdaq/n_fairvalue.html
>
> Most traders know that fair value for the SP 500 leading month contract is
> updated daily by H.L. Camp. Here is the address if anyone needs this one:
> http://www.programtrading.com/buysell.htm
>
> May your longs go up and your shorts go down,
It is possible to convert SP's fair value to ND's
Rather than using Fair value let's use premiums:
SPPREM = ((r-SPDIV)*x/365) * SPX
NDPREM = ((r-NDDIV)*x/365) * NDX
expressing ND premium in terms of SP's, we get;
NDPREM = SPPREM * (r-NDDIV)/(r-SPDIV) * NDX/SPX
As long as interest rates stay around 5% and SPDIV stays at
around 1.2%, and ND div at 0.1% we can simplify:
NDPREM = SPPREM * (0.05 - 0.001)/(0.05 - 0.012) * NDX/SPX
NDPREM = 1.29 * NDX/SPX * SPPREM
with NDX at 3841 and SPX at 1478, this simplifies to:
NDPREM = 3.35 * SPPREM
So, ND's fair value premium above cash, should equal roughly 3.35 times
SP's fair value premium at current prices. If rates, prices or dividends
change a lot, you'll need to recalibrate.
The HL Camp link showed Friday's SP fair value at $16.74, this would
place the ND fair value at $56.08.
BTW, as HL Camp's page says their fair value doesn't necessarily
track the theoretical fair value shown on CBNC. I show the theoretical
fair value at $10.77, which is quite a bit lower than the $16.75
shown at HL Camp. Whichever SP fair value premium you decide to
use, however, the ratio above should hold.
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