Whats the difference between daily indices and futures indices?

[Pi3141]

Hello all,

I'd just like to ask, apart from the size of the spread, and that the daily indices have an overnight charge, are there any other differences between the two?

Also, are there any correlations between the two? - i.e. a spike in the futures index will occur before it appears on the daily index etc?

Many thanks for your help

Pi

 

[amit1986]

You cannot trade an index, so therefore, a futures contract on an index lets you trade the underlying index without having to build an entire portfolio composed of the stocks in that index. This saves commissions.

Also, futures will not represent the exact value of an index because they also take account of the "future value" the index could go to at the expiration of the futures contract.

They are very highly positively correlated, but it's not necessarily the case that a spike in the futures contract will occur before the index itself. Arbitrage and black-box trading makes this almost impossible.

 

[Martinghoul]

There are threads here about this subject. One's a spot instrument, the other one is a fwd.