Daily Cash vs Daily Future

[sak07]

Dailly Cash vs Dailly Future

I have noticed that on finspreads spread betting they offer two dailly market prices on most of the major indices. One is called the dailly cash and one is a dailly future. I was wondering what is the difference between these two markets....surely they are the same thing. The spreads are usually very close but why would they offer two prices on the same market.

Any explanation would be greatly appreciated.

 

[rossored]

The futures price you're probably looking at for the Dow is no doubt based off the september contract, which is currently pretty close to the cash index in price. If it is a true September contract, you could in theory buy it today and run it up until the 3rd Friday of the month before it expires. Alternatively, you could probably buy a December Dow position, which you could hold up until just before Christmas. It just depends on your strategy as to which suits you best.

Cant honestly think why though, if its a daily future with an expiry today why you'd want to buy it if you're going to close it before the end of the day anyway. You'd just be better off buying the normal daily quote.

More likely, its a way of your SB company getting a slightly fatter spread out of you by offering you something you dont really need.

Ooops, there's the cynic in me coming out again...

 

[Finlayson]

haven't traded with finspreads for a while, but usually they will offer 3 or so markets :quarterly future, daily future & daily cash.

quarterly & daily future will be in line with each other as these track the actual underlying quarterly future contract, however I believe the daily future will be a slightly lower spread to encourage u , I presume ,to use this for day trades.

the 'daily cash' will be generated around the cash market index, though this will probably not track the index exactly, I am not quite sure how each SB company generate their 'cash' figures, but this is what causes the so-called 'bias' people refer to.

so if u r trading with the 'cash' & following the cash index from a separate feed they will sometimes differ.

Jason

 

[razor130]

From what i understand... The CASH price is the value of what it would cost someone to purchase the commodity at that day and time.

The Future price is what it will cost you at a date further down the road... say weeks or months.
The Future price should always be at a premium over the cash price because you are incurring storage fees and such.

That's why you have premium vs deferred cost on the basis. If there is an over-abundance of the futures market that you are looking at... you can sometimes get a lower costs on storage, maintanence, etc... on futures and this relates to Over or under supply.

If the cash basis is very close or even equal to or lower to the futures months further out in time,
it shows a situation with over-supply and even demand for that particular commodity.

I hope that this is what you were asking about, and helps.

Razor130

 

[marketwizard123]

The Future price is what it will cost you at a date further down the road... say weeks or months.
The Future price should always be at a premium over the cash price because you are incurring storage fees and such.

That isnt actually true, the futures price will not necessarily be above the cash price it will be either slightly above or slightly below. These prices should always converge near the delivery day, and are kept close to each other because otherwise an arbitrage opportunity will be available. The futures price is based on the concept of fair value..

In the case of commodities the costs incurred are flipped, the futures holder is not incurring storage fees the cash holder is. hence the advantage in buying and selling the futures contract.

 

[TomTom]

Hmm noticed that hoggums has kept out of this discussion.
He would be the best person to answer this quiery.

As the cash index positions are not related to the futures this gives the SB firm many options.
A, Can bais it on the the futures quote then apply a fair value to this quote, then if one is long and the futures galop away and the index dose not they will then refer quites the underlieing index and not the fair value of the futures.
B, The oppersite can be done if your short.#
C, As you are trading with a SB firm you are rading there prices which supposed to be derived from the underlieing market. The Sb firms quotes can be ajusted to a fair value that is faverable to them and not you.

The above statements are facts and have had corespondance to proove this.

 

[glasshopper]

I hope I'm correct but the daily is based on the cash and expires or rolls over at the end of the day. No further discussion needed there

The futures are based on the futures contract for that particular instrument & month and traded at 'fair value' which is why the price is different to the cash. If you allow it, it either rolled over at expiration into the next contract month or expires at expiration (ie June S&P expire/rollover 3rd Friday in June to September S&P or expires)

The futures daily is the futures price but expires or rollover is daily. So if you trade the June future it rolls over June as I explained above but the June daily future will print the June price but rollove/expirer the end of the day.

 

[Splitlink]

The futures price you're probably looking at for the Dow is no doubt based off the september contract, which is currently pretty close to the cash index in price. If it is a true September contract, you could in theory buy it today and run it up until the 3rd Friday of the month before it expires. Alternatively, you could probably buy a December Dow position, which you could hold up until just before Christmas. It just depends on your strategy as to which suits you best.

Cant honestly think why though, if its a daily future with an expiry today why you'd want to buy it if you're going to close it before the end of the day anyway. You'd just be better off buying the normal daily quote.

More likely, its a way of your SB company getting a slightly fatter spread out of you by offering you something you dont really need.

Ooops, there's the cynic in me coming out again...

I've never noticed a difference in spread between tho daily open and same day close. Neither does the price difference reduce towards the end of the day. It is noticeable on a daily basis, though. Last Thursday, the difference was 46 points, if I remember correctly. Today it will be closer and so on until the April expiry.

I use it, occasionally, for orders because they move with the daily, while I am occupied with the other. The price difference has not mattered to me, so far.

The margin, on FT, is 10 points more.

It is a useful tool, but not essential.