why YM Sep is less than YM June

Discussion in 'Index Futures' started by trader_david, Jun 11, 2009.

  1. any explaination? I would buy sep. ym, plan to hold a while
  2. dhpar


    dividend yield < financing costs of cash index
  3. too professional, any plain and vanila explanation?

  4. Big AAPL

    Big AAPL

    The closer the contract comes to expiration, the closer it is to the cash index (parity). When the new contract is instituted, it reflects the market participants expectations of it's future value. That is plain vanilla (no sprinkles).
  5. dhpar



    it is the most basic thing in the future trading (cost-of-carry principle) - more basic than pressing a buy/sell button.

    using continuous compounding and simplifying you have:

    F1 = Spot * exp((dvd.yld - fin.costs) * T)

    where F1 is the first future contract. similarly:

    F2 = F1 * exp((dvd.yld - fin.costs) * T)

    i.e. in act/act annualized terms you get ln(F2/F1) = dvd.yld - fin.costs

    which is exactly what i stated in the post above. QED

  6. Big AAPL

    Big AAPL

    Thank you dhpar.
  7. thanks very much.

    I just trade YM, did not notice the difference between sept.Ym and June YM.

    just one more question, when june YM epire, if I hold YM (bought it at 8250), I do not sell it, what will happen, just convert it into cash? or i have to sell it?