Pricing (1C Contract)


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The standard market pricing mechanism for SSF 1C contract is:

Futures = Equity Price(P) + Cost of Carry – Estimated Dividend (D)

Cost of Carry = P * I * N / 360 with

P: Equity Price
I: Interest Rate (function of Libor and the borrow cost)
N: Number of days to expiration

Generic Pricing Example:

Stock XYZ, a $100 stock, pays no dividend during the life of the futures contract.
Cost of Carry components: S = $100, I = 40 bps, N = 30 days
XYZ Cost of Carry = $100 * 0.0040 *30 / 360

XYZ Future Price is $100.0333 = $100.00 + 0.0333 (Cost of Carry) – 0.00 (D)

 

Click here for an outline of the OneChicago’s SSF 1C contract.