ES Futures lower than SPX

Discussion in 'Trading' started by daytrader85, Mar 25, 2011.

  1. Hi,

    I have noticed that the S&P Futures (June Contract) has been trading below the S&P 500 cash. Usually, the futures always trades ahead or higher of the SPX.

    When the opposite occurs, what does that mean? Towards expiration, the futures and cash have to converge. Is this predicting that stocks are pointing downward?

    I noticed this with SPX and the March contract as well, and a few days later, we had the Japan Earthquake/Nuclear Crisis and markets fell hard for the next couple days.


  2. pitcher


    All Congressmen and Senators will put a bill before the House to stop oil futures trading Monday. Only a business that uses oil in their business can buy oil, no futures trading will be allowed.
  3. 1) Why?...."Cost of carry". It's not the same as an inverted price structure in a physical commodity. :eek:
    2) Futures trade at a discount to the cash-index when dividend rates are higher than short-term borrowing rates. :cool:
    3) If that condition didn't occur, you could earn "free money" from hedging a stock portfolio. :D
    4) The convergence occurs slowly. :(
  4. "Usually, the futures always trades ahead or higher of the SPX. " is nonsense.

    Please educate yourself by reading the quality information available at
  5. Except it sort of is - if dividend yields exceed borrowing costs, it forces money out of "storage" and into stocks until either yields fall or rates increase. That's not all that different conceptually from an inverted price structure forcing a commodity out of storage.
  6. LOL well said, A+ for applying all 4 smelly icons correctly.
  7. 1) Interesting viewpoints.
    2) Financial/paper commodities don't have "supply tightness" in the same way that physical commodities can exhibit. Stocks and bonds can be issued/created, at will, to alleviate a "shortage".
    3) The premium/discount in the stock index future is "governed" by relative interest rates to an exact and precise "number". Carrying charges and premiums for physical commodities aren't governed by the same mathematics.....I've always thought and believed.
    4) Please answer this....what does it mean, from a "financing perspective"(banker parlance) if a commodity, i.e. cash-soybeans, are trading 20 cents under the nearest future,(carrying charge), compared to them trading 20-cents over the nearest future (inverted)? :confused:
  8. I wish there were more than 8 of them. :)

  9. This has happened for years.
  10. schizo


    Maybe you should learn to read. Apparently, he said "usually". In fact, the futures usually do trade in premium to cash.
    #10     Mar 25, 2011