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Hi John,
I’m getting a little muddled with estimating the futures price. sometimes it seems that the unexpired basis is calculated using the difference between the spot rate and the futures close price to estimate the basis and other times it used the difference between futures prices (for example if dec, march and june are quoted it takes the difference between two to get the basis). I can’t seem to find a correlation between the two differing calculations. can you please tell in which circumstances I would use each method?
thank youCollette
for example using the Nutourne co dec 18 question it’s between the march and june futures rates and not the given spot and june future rate
Strictly the lock-in rate should be calculated the way that I explain in my free lectures. However in the exam you get the same result buy apportioning between the price of the futures that expire before and after the date of the transaction.
The examiner shows both ways in his answers and both ways get the marks.
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