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Continuous Index-Futures vs ETFs for buy & hold


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Continuous Index-Futures vs ETFs for buy & hold

  #11 (permalink)
 
SMCJB's Avatar
 SMCJB 
Houston TX
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Eratosthenes View Post
Only concern that comes to my mind are potential cost for rollover from one expiration date to the next version. I have to admit that I simply don't know whether there are significant rollover costs at the end of the expiration date of one contract to the next. At the moment with 3 month distance between the different contracts each MES-Version differs in about 1%, that is about 40 points, which might suggest rollover costs of about 4%/year due to four rollover-Transactions.
But the current June-contract is far from it's expiration date. So near the expiration date the difference might chance, depending on the expectations?
Are the rollover costs of continuous (index) futures in any way roughly predictable?

Somone told me recently that the following contract would be even slightly cheaper, "due to interests", which I couldn't understand.

Equity Futures rolls are a function of cost of carry to hold the position minus dividends received while holding the position. If the spread deviates from this value people will arbitrage it and take the free money.

While it is true that there is a roll cost, it's also true that the cost of carry for a future is a lot lower especially in this interest rate enviroment.

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  #12 (permalink)
futrader89
Dallas, TX
 
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Hey,

First of all thank you very much for putting this question and explaining the question in very much detail. Myself, also thought of the exactly same thing and trying to find the correct answer. But so far havent got any luck.

As far as my understanding, Now regarding interest rates, for the futures its already covered in the price of the futures contract. So we are not charged extra by the broker. And I am assuming it would be cheaper comapred to the interest rates charged by the broker for ETF of the same amount $$ value.


Still looking for many questions like roll over prices difference, pros and cons, whats the affect, do we need to do manually every quarter or not and all that stuff..

Please post it here if u find any. And I will surely post ehre, if I find any.

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Eratosthenes View Post
Hello and greetings to all users here,

I'll introduce myself soon in the corresponding section. But right off the start I've got a question that's been in my mind all the time:

Does it make sense to use (for instance) the S&P500 Micro (MES) future or any other continuous index future for long term buy&hold instead of an ETF like the VOO?

At first glance it seems to me that there are many advantages like higher leverage (will leave sufficient cash to secure against margin call), no real Margin credit like with ETFs, so no interest payments for money lent from the broker.
As there are continuous futures for all indices, I wouldn't even have to bother to roll them every few month manually. In case there are any disadvantages with continuous futures than I would choose the normal contratcs instead and roll them manually 4x/year.

Only concern that comes to my mind are potential cost for rollover from one expiration date to the next version. I have to admit that I simply don't know whether there are significant rollover costs at the end of the expiration date of one contract to the next. At the moment with 3 month distance between the different contracts each MES-Version differs in about 1%, that is about 40 points, which might suggest rollover costs of about 4%/year due to four rollover-Transactions.
But the current June-contract is far from it's expiration date. So near the expiration date the difference might chance, depending on the expectations?
Are the rollover costs of continuous (index) futures in any way roughly predictable?

Somone told me recently that the following contract would be even slightly cheaper, "due to interests", which I couldn't understand.


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  #13 (permalink)
 thw333333 
Jupiter Island, FL
 
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This question makes my blood pressure go up. I trade rty and emd and have for many years. I cannot imagine holding for an entire year. After covid's big dip I started trading the daily chart here and there and holding for some days at a time, up to about 2 weeks at most. I did not enjoy it. Waking up in the middle of the night, checking news, etc. I guess I am a day trader at heart.

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