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In a message dated 9/13/02 9:20:26 PM Pacific Daylight Time,
kentr@xxxxxxxxxxxxxx writes:
<< I noticed today that the ES U & Z contracts are trading at the same price
level. Shouldn't Z be a few points higher for interest consideration? Is
this a function of the extremely low interest rate environment?
Kent >>
Kent,
The low premium for the sp (SP and ES) futures contracts certainly stems from
the low interest rate environment. Interest rates and the dividend rate paid
by the S&P 500 stocks are close to the same so their effects essentially
cancel each other. Given that, I was also surprised to see the U and Z
contracts trading at essentially the same price. I calculate the 'fair
value' difference between the Z and U contracts should be about 1.5 points.
This is a far cry from the 10 - 15 points difference between adjacent
contracts seen not too long ago.
Lee Scharpen
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