At this time, 03U futures have already much bigger volume. When is actually the best time to switch? Is the volume the only reason to switch? Why is also the price of them (03U and 03M) quite different? Lojze
The best time to switch contracts is probably when the volume of the next contract is higher than the volume of the current contract. The price of the two contracts are different because of the difference in time until expiry. The M contracts expire soon, so to avoid arbitrage their price must be pretty much equal to the spot index. However, the U contract has some time to maturity so to avoid arbitrage, interest rates and dividend yields affect the price also. Remember, to people that long futures contracts the dividends are a cost - since you are obligated to purchase the underlying in the futures but you do not get the dividends on it now. The interest payments avoided (since you don't pay cash upfront for a futures contract) are a benefit to a long position since you can invest the cash in something else instead of having it tied up. Simply put, the difference between the interest rate and dividend yield determine the price difference between these two contracts. This thread may help, http://www.elitetrader.com/vb/showthread.php?s=&postid=203915#post203915