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What information do we discover when we look at the June19 S&P 500 futures price and...

What information do we discover when we look at the June19 S&P 500 futures price and the Sept19 S&P 500 futures price? Why?

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Answer #1

June19 S&P future price- 2891.80

Sept19 S7P future price- 2896.80

This shows that that the future market is at premium(Contango), which means future prices are higher than the spot. This is a normal trend of the market.

This occurs due to fair value of the future contract. The future price is basically derived from the spot price using the below formula-

Futures Price = Spot price * [1+ rf(x/365)]

Where rf is the risk-free rate and x is the remaining days of the future contract before expiry. So standing on current date, the remaining days of the Sept19 contract is more than that of June19 contract, which results in higher value for Sept19 future contract.

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