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Strategies & Market Trends : Tech Stock Options
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To: Patrick Slevin who wrote (44041)5/29/1998 10:54:00 AM
From: Follies  Read Replies (1) of 58727
 
The "fair value" on futures contracts is equal to the current SPX index plus interest computed to the delivery date.

for example June SPX futures premium today should be SPX*5.4%*(15/250)= SPX*.00324 = 3.56 premium.

When the market changes course rapidly buying or selling comes in to the futures market first causing the the premium to go up or down above or below fair value by a substantial amount (thats when the arbitrageurs step in). When we had the turn on Wednesday premium went to 9 or more.
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