I'm new to spreads and I see that there is about 20 points between the June and March 16 ES contracts. They appear to be in backwardzation as the front month is higher (do I have that right?) which means I should buy the short month and sell the out month of a spread (or does that axiom only apply against the spot?) Next my margin is one contract, right? The overnight initial? About $5K on the spread? At its highest? So, when the gap inevitably ES front and out month closes for a theoretical 20 point gain or $1000, how is this not a high percentage 20 percent gain in 11 10 or 11 months? I must be missing something. Help a new spreader out.
How will you hedge the March 16 contract after the June expires? I can't tell you everything that goes into to cost difference, one is dividends. If I buy the S&P basket and sell the future, I keep the dividends. That is one why each future over time is worth less.
Not a spread worth considering. formula is very easy. Look for a real physical. Much more interesting. Grain/energy etc.