Fair Value headlines. What do they mean?
A. Example: S&P Fair Value +5.27 Buy program +6.52 Sell program +3.92 What this headline means is that the fair value spread between the futures market and cash market for today is 5.27 points. If the spread narrows to less than 3.92 points, sell programs will kick in to sell the cash market so that the spread goes back to its fair value. The opposite occurs when the spread gets too wide: buy programs kick in to buy the cash market. Each day the fair value spread narrows as the futures contract marches toward expiration. Then we roll to the next contract and the whole thing starts all over again • Q.
