Shorting an index future against an ETF on the same index will earn the risk free rate?

Sorry for my english, I'm not a native speaker.

Shorting the same amount of $ of an index future against an ETF on the same index you own, will earn the risk free rate?
I'm comparing this strategy against selling the index ETF and investing the proceedes in the 10 year T-Note.

Thanks

 

No. Shorting ES and buying SPY won't give you free money.

No. When the ETF rises in price, you'll end up losing money. And trust me, SPY is up 5% already today. That's more than 4.56% for 10 yr note.

 

Futures are higher in cost than it's equity equivalent due to leverage (risk free rate), treatment of dividends, cost of storage, cost of insurance. For equities the futures price is higher due to risk free rate as you mention, minus the fact dividends are paid out. In theory, assuming no dividends for simplicity, you would earn a risk free rate by shorting the futures contract and buying the underlying stock index, BUT you have to put up capital in the stock to do it, so theoretically it's no different than buying treasuries with that capital.

So yes, you are correct, but not sure the IRS rules around using it as a way to fund capital gains losses from the past. Quite sure the IRS wouldn't allow you to take the gain and treat it as capital gains. You can do the same with options, but again, IRS probably won't allow capital gains from it, I assume you are supposed to treat it as simple interest, but not sure.

 

yes. Less management fees of the ETF, transaction costs of rolls, and changes in dividends.

 

Thank you.
Changes in dividends aren't factored in the EFT you own? I'm assuming an ETF that reinvest the dividends it receive.

 

Keeping an exact match on notional is a very different question than which does/does not include dividends. If you want near zero risk, you will have to figure out exact notional throughout time. Most ETFs likely reinvest the dividends, if not all I'd think, but I have no idea so you should look it up for the ETF you are thinking of. Why are you interested in doing this by the way?

 

the future will price an implied dividend. The etf will pay the actual dividend. If there is a difference it will create a variance in your pnl.

borrow is another factor (like a dividend).

 

Years ago I invested in a Nasdaq 100 ETF that has grown almost threefold. Now I'd like to rebalance, taking some fixed income to stem risk.

I'm not a US citizen, in my country there's a capital gain tax, whenever you sell a financial instrument you must pay 26% of the realized gain, or if you sell at loss you are entitled of a carryforward of the loss for the next for years, The loss can be offset with future gains on other financial instruments.

So to rebalance the portfolio, say to 50% ETF and 50% on fixed income, I can either sell 50% of the ETF, pay 26% of the realized gain and invest the residual sum on a US bond. Or as discussed above, sell a bunch of micro future on Nasday 100 for a nominal amount that match 50% of the ETF.
I think the latter solution is way better if I can implicity earn the risk free rate. What do you think?

 

seems reasonable. you will add 1%/year for as long as you can avoid the taxable event.

 

Operationally:
You will have margin issues as you will have to put up margin on both sides.
You may have some marked to market issues but that will resolve itself in the long run.
Futures taxes might be treated differently in your country than the long term taxes from the QQQ's so you might arbitrage yourself on the taxes.