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Why is the SPI200 trading consistently at 10-20 points below the XJO?

Discussion in 'Derivatives' started by matalex, Sep 18, 2015.

  1. matalex


    Likes Received:
    Sep 16, 2015
    Dear ASF

    The APU5 traded at nearly the same price as the underlying XJO during market hours. The only day it didn't was on Friday 11/9 when CBA was in a trading halt, the SPI incorporated the 9.6% loss in the trading price.

    My question:

    I understand that the further out from the expiry of a futures contract, there is less volume and therefore increased volatility. What I cannot understand though is why right now (it will have changed when you read this obviously but the distance will likely still be there), APZ5 = 5140 whilst the XJO = 5158. Why does the SPI trade between 10 and 20 points under the XJO yet still moves in sync with each uptick / downtick?

    Is there any technical reason or is it purely the fact that in general, futures traders feel the market is overpriced by x amount of points? Does the price correlation begin to get closer and closer as the expiry date of the futures contract approaches?

    I'm sure this question has a really simple answer and I'm missing something. :1zhelp:
  2. DeepState

    DeepState Multi-Strategy, Quant and Fundamental

    Likes Received:
    Mar 30, 2014
    You are missing considerations that dividends exceed the rate of interest applicable over the period to Dec.
  3. Trembling Hand

    Trembling Hand Can be found on the bid

    Likes Received:
    Jun 10, 2007
    The difference is that the components of the XJO will likely be paying out a dividend during the next 3 months and the XJO will lose value approximately the same as the div while the holders of the SPI will not receive those div. That is why the XJO is 'worth" more. Plus in all futs contracts there is a small cost for cost of carry.


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