What should be aligned before interpreting the gap?
Reveal the worked answer
Time, contract month, underlying definition, adjustment and carry.
A data audit is part of analysis.
Equity Index Futures · FUT-25 · Core
Apparent cash/futures disagreement
What should be checked before declaring mispricing?
What you will learn and prerequisites
- Explain the mechanism in the lesson question.
- Reproduce the worked comparison and recognize its failure case.
Read first: What is an equity index future?
A large apparent gap can be economic or a measurement mismatch. Different timestamps, contract months, adjustment methods and carry all change the comparison.
The first response to surprising divergence should often be a data audit.
Understand the mechanism
A cash index can be stale while a future trades currently. The next-quarter quote can differ from the front month. A back-adjusted history can display levels never quoted by one actual contract.
Arbitrage relates comparable economic claims, not every pair of numbers on two screens.
Walk through the process
Check symbol, month, source delay, time zone, adjustment method and fair-value convention. Compare synchronized observations and report missing or delayed data.
Only then consider an economic explanation. An apparent precise live signal built from stale data is not precise evidence.
Operational boundary
All figures are fictional teaching inputs, not current quotes or margin schedules. Product rules, broker requirements and usable liquidity remain separate from the model example. A planned exit and an algebraic hedge are not execution guarantees.
A worked example
Cash shows 5,000 from fifteen minutes earlier. The current near future is 5,035 and the next month 5,060. Comparing next month with stale cash gives a sixty-point gap.
If current synchronized cash is 5,020 and near fair basis fifteen points, the near future is consistent with the snapshot. The graph exposes the distinct references rather than mixing them.
Apparent cash/futures disagreement—worked comparison
Vertical: Quoted level
Horizontal: Stale cash / current cash / near future / next future
1. Fictional example
Read the graph as a data table
| Stale cash / current cash / near future / next future | Fictional example |
|---|---|
| 1 | 5,000 |
| 2 | 5,020 |
| 3 | 5,035 |
| 4 | 5,060 |
What would invalidate the reading?
A chart that rolled months can create false divergence. Selling a supposed premium without aligning inputs can trade a data error.
Check your understanding
Try the question before revealing its answer. These are reading checks, not trading certification or a site completion record.
What is the critical failure to avoid?
Reveal the worked answer
A chart that rolled months can create false divergence. Selling a supposed premium without aligning inputs can trade a data error.
Explain this risk before treating the example as a decision rule. A correct calculation does not guarantee a favorable market outcome.
Return to the question: What should be checked before declaring mispricing? State the observed facts, the assumptions and the failure condition separately.
Sources, assumptions and downloadable script
External references support definitions and conventions. Worked scenarios and prose are original. No current quotes or dealer inventory are claimed.
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