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What information do we discover when we look at the June20 S&P 500 futures price and...

What information do we discover when we look at the June20 S&P 500 futures price and the Sept20 S&P 500 futures price? Why?

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Answer #1

The future price of futures as on closing of 21st may 2020 are:

June 2020 : 2946.50

September 2020: 2937.50

Observations:

1. S&P 500 index tracks the value of top 500 companies in US. since the price of June future and september future is trading at the same rate, it is expected in the market that due to carona virus the growth of market will be zero and hence the price in the future will remain same as it is today.

2. It also means that there is a higher demand to purchase share currently in the market than there will be in the future (since new investors wants to purchase shares at low prices which they expect will rise in the future).

3. Traders use this oportunity to sell during this demand at high price and purchase in the future at low price when the demand will be low.

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