Futures also have time-decay, right?

Discussion in 'Index Futures' started by crgarcia, Oct 19, 2007.

  1. As options do?

    How much they decay each day?
  2. no time decay in value...they just do not exist after expiration...so, the Dec 08 Mini SP futures are worth as much now as they would a day before expiration next year...not the same at all...
  3. Well... I think you're on the right track. Time decay does also occur in ftures as it does in options... but it's barely noticeable by comparison.

    You're only going to notice it when you're comparing the spot price with the futures price...and the decay is steady (constant) and does not increase/decrease when nearing expiration.

    With that being said... Do a search for 'cost of carry'... the reason that the futures price is not equal to the spot price is found in this single fact.

    Good luck
  4. Mate there is no edge down this road so why bother? Go find something that gives you an edge unless you like wasting time
  5. Futures price = spot + cost of carry...

    that's the cost of holding the futures until expiration at the current interest rate.
  6. Pekelo


    You are wrong.

    ES decays about 4 pts per month, so app. 0.15 point a day...
  7. If you are talking about trading futures on a daily basis no decay
    $50 bucks per point

    No time decay at all

    If you are hedging your portfolio with futures and thinking about
    holding 6 months that is a different story you will have to deal with rollover.

    but a tick is a tick and a point is a point until expiration date
    and that happens every quarter
  8. Poole



    its not decay

    you should research the topic.

    I'll give u a hint:

    lets say futures matched the index price all the time, anyone could beat the S&P index by 4.5% per year right now

    how? go long 1:1 dollar ratio of your account on a ES future, and earn interest on your unused margin in the account.

    so..... put the pieces together and?

    good luck
  9. Pekelo


    Sure it is. When we switch to the new contract and it still has 3 months until expiration, it is about 14 or so points HIGHER than the cash.

    During the next 3 months that 14 Premium points will disappear in a linear fashion and by the day of expiration the future will match the cash index...

    The cause of the premium is the dividens that the stocks pay during the 3 months in the index. Less time left until expiration, less dividens to be collected, thus the linear decay...

    Thanks for the opportunity to educate...

    P.S.Another easy way to look up the premium is to see the difference between the Dec and March contracts. You divide that by 3 and you get the montly decay...
    #10     Oct 21, 2007