I have been wondering the same. The fair
value spread of March over SPX is $0.40 today with just a few days left until
expiration. While the risk-free interest rate used in calculating premium had
dropped by a huge amount, the March to June spread still seems way too tight
at 2+- handles. Seems to me that current March to June spread strongly favors
buying.
Earl
FV = S [1 + (I - D)]
Where "S" is the S&P 500 Stock
Index.
Where "I" is the amount of
Interest paid to your banker or broker to borrow the money to buy
all of the stocks in the S&P 500 Index. The interest is calculated
based on a percentage lending rate (R) from the current date (today)
until the date that the S&P Futures Contract expires in March, June,
September, or December.
Where "D" is the amount of
Dividends paid to you from the companies that you own in the
S&P 500 Index that pay a dividend. The dividends are paid to
you based on the record dates for any stock in the Index that is
announced between the current date (today) and until the date that the
S&P Futures Contract expires in March, June, September, or December.
This dividend income is expressed as a percentage rate too.
From: realtraders@xxxxxxxxxxxxxxx
[mailto:realtraders@xxxxxxxxxxxxxxx] On Behalf Of
ketayun Sent: Tuesday, March 11, 2008 5:25 AM To:
Realtraders Subject: [RT] Sept Futures
Ordinarily there is an
approximately $12.00 premium on the upcoming front quarter futures compared to
the Cash Index. However I see that the March and June futures have only
$1-2. Is there any reason for this?