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Why Deferred Micro E-mini S&P Futures Can Trade Below Near Contracts

Article Quant Q&A · Author: Preston Lui
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Summary

The post questions why Micro E-mini S&P 500 futures expiring in June 2021 were quoted below the March 2021 contract, despite the author’s expectation that later expiries should cost more to avoid arbitrage. It notes that the S&P 500 is a total return index and wonders whether liquidity or trading restrictions explain the prices of more distant contracts.

The document presents the pricing puzzle but does not provide an answer or supporting analysis. It therefore offers no resolution on fair-value pricing, financing, dividends, market conditions, or whether the quoted prices were comparable and current. Readers can take away that a futures curve need not slope upward, but further information is needed to explain this specific observation.

Key ideas

  • Futures prices across expiries can differ, and the curve is not guaranteed to slope upward.
  • The post raises a potential arbitrage argument but does not establish its assumptions.
  • It offers no explanation for the observed price difference, so the specific cause remains unresolved.

Tags

FuturesDerivatives pricingUS markets
Full text
# Why MES2106 is having a lower price than MES2103?


# Why MES2106 is having a lower price than MES2103?












MES refers to Micro E-mini S&P 500 Index Futures

As my understanding of futures goes, future price increases with contract end time because otherwise, one can buy the longer expiring contract and sell the short expiring future, then start shorting the underlying assets of the index to achieve arbitrage.

However, it seems the current price of MES2103 is 3899.25 and MES2106 is 3887.75.

SP500 is a total return index so it is not like dividend is a factor on the index value.

For later strikes future (like MES2112 has 3875.5 and MES 2203 has 3861.5) I assume it is due to liquidity and trading restriction issue. But it seems MES2106 doesn't have this problem.

What did I miss?

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.