found formula for taking futures quotes and converting to spot !!!
MsMorrisine
Posts: 32,219 ✭✭✭✭✭
Calculate commodity futures prices by adding storage costs to the spot price of a particular commodity. Multiply the resulting value by Euler's number (2.718281828…) raised to the risk-free interest rate multiplied by the time to maturity. Generally, futures prices and spot prices are different because the market is always forward-looking. The difference in a commodity's spot price and the future price is due to the cost of carry and interest rates.
For example, assume the spot price of gold is $1,200 per ounce and it costs $5 per ounce to store the gold for six months. The six-month futures contract on gold, given a risk-free interest rate of 0.25%, is $1,206.51, or (($1,200+$5) x e^(0.0025 x 0.5)).
storage fees:
https://www.cmegroup.com/rulebook/files/service-providers.xls
it's $15 per contract per month, and the contract is for 100 troy ounces.
futures price = (spot price + storage x the amount of time to maturity of the futures contract) x e^(""risk-free"" interest rate x portion of year to maturity of the futures contract)
so re-arrange for finding the spot price
( futures price / ( e^( I.R. x Maturity )) - Storage = spot price
right now spot price is 1427.60 / 1428.60 (kitco)
right now the future price is 1440.50
the maturity for that futures contract is 5 months
the 12 months interest rate on the treasury is 1.97%
storage is $15 per month / 100 troy ounces.
(e = 2.718281828…)
here we go:
{ (1440.50) / [ (2.718281828…) ^ (.0197 x 5 months/12 months in a year) ] } - [ ($15 / 100) x 5 ] =
spot of $1,427.97
pretty darn close.
Comments
Wow.... quite the mental math exercise... looks good though...Cheers, RickO