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What information do we discover when we look at the June18 S&P 500 futures price and...

What information do we discover when we look at the June18 S&P 500 futures price and the Sept18 S&P 500 futures price? Why?

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Answer #1

Solution :

Here is the data for S&P Futures:

NAME DATE QUOTE Volume
S&P500 JUN 18 5/2/2018 2,625.00   58608
S&P500 SEP 18 5/2/2018 2,631.70 152

Information that we discover from these futures

1. Price: Price of the SEP 18 future is higher than JUN 18 futures and this because of time. The formula for future price calculation is F = Spot price * exp ( r *T ). Higher will be the time, higher will be the future price. Here Sep price is 2631.70 while June price is 2625.0

2. Liquidity: Generally the futures that has the lowest time to maturity will be more liquid. Here, June futures are closer because we are in May and June is just 1-month away as compared to September which is 4-months away.

Here traded volume on June future is 58608 as compared to 152 for September. Hence June future has more liquidity as higher the volume, higher will be the liquidity.

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