Fair Value

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Hi,

Anyone here have an indicator for calculating fair value for futures contracts?

Thanks,

Paul

aka smiley486

 

anyone can help me out here?

 

What do you mean with fair values?

smiley486:
Hi,

Anyone here have an indicator for calculating fair value for futures contracts?

Thanks,

Paul

aka smiley486
 

FV = S [1 + (I - D)]

Where "S" is the S&P 500 Stock Index.

Where "I" is the amount of Interest paid to your banker or broker to borrow the money to buy all of the stocks in the S&P 500 Index. The interest is calculated based on a percentage lending rate (R) from the current date (today) until the date that the S&P Futures Contract expires in March, June, September, or December.

Where "D" is the amount of Dividends paid to you from the companies that you own in the S&P 500 Index that pay a dividend. The dividends are paid to you based on the record dates for any stock in the Index that is announced between the current date (today) and until the date that the S&P Futures Contract expires in March, June, September, or December. This dividend income is expressed as a percentage rate too. Or ---

F = S [1+(i-d)t/360]

Where F = break even futures price

S = spot index price

i = interest rate (expressed as a money market yield)

d = dividend rate (expressed as a money market yield)

t = number of days from today's spot value date to the value date of the futures contract.

 

Interesting.

 

Did you find this

Did you ever find a indicator that plots fair value ?

Turhovach:
FV = S [1 + (I - D)]

Where "S" is the S&P 500 Stock Index.

Where "I" is the amount of Interest paid to your banker or broker to borrow the money to buy all of the stocks in the S&P 500 Index. The interest is calculated based on a percentage lending rate (R) from the current date (today) until the date that the S&P Futures Contract expires in March, June, September, or December.

Where "D" is the amount of Dividends paid to you from the companies that you own in the S&P 500 Index that pay a dividend. The dividends are paid to you based on the record dates for any stock in the Index that is announced between the current date (today) and until the date that the S&P Futures Contract expires in March, June, September, or December. This dividend income is expressed as a percentage rate too. Or ---

F = S [1+(i-d)t/360]

Where F = break even futures price

S = spot index price

i = interest rate (expressed as a money market yield)

d = dividend rate (expressed as a money market yield)

t = number of days from today's spot value date to the value date of the futures contract.
 

This is one of my favorite fundamental indicator:Big Mac index | The Economist

 

how are you going to calculate the fair value in the spot market unless you have all the information from forex option market.That would be an edge to know all that time decay,gamma,delta,vega,rho values of a currency.Additional info:

spot movement is increasingly driven by what goes on in the options market. When the market is long gamma, market-makers as a whole will be buying spot when it rises and selling spot when the exchange rate falls. This behavior generally can keep the spot rate in a relatively tight range.

When the market is short gamma, however, the spot rate can be prone to wide swings as players are either continually selling when prices fall, or buying when prices rise. A market that is short gamma will exacerbate price movement through its hedging activity. Thus:

Market-makers long gamma: Spot generally will trade in a tighter range

Market-makers short gamma: Spot can be prone to wide swings

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