Futures Fair Value Calculator

How the futures fair value estimate is calculated

Futures fair value starts from a cash or reference price and applies the cost of carrying that exposure to expiry. CME Group’s equity-index illustration adds simple financing and subtracts dividends. Other products can involve storage, insurance, convenience benefits, foreign interest rates or product-specific settlement rules, so this general page exposes those adjustments as entered price points rather than pretending one universal contract model exists.

The audited example enters a 5,000 spot reference, a 5% simple annual financing rate, 90 days on a 360-day basis, 10 points of carrying costs and 50 points of income or benefits. The year fraction is 0.25 and financing is 5,000 × 5% × 0.25 = 62.5 points.

Net carry is 62.5 + 10 − 50 = 22.5 points, so the theoretical fair value is 5,022.5. The fair basis is +22.5 points, equal to 0.45% of spot. Those figures reproduce the disclosed convention; they do not establish the price at which a futures contract should or will trade.

An actual futures price can differ from a theoretical estimate because the model inputs are estimates, the contract has its own delivery and settlement mechanics, and markets include funding constraints, taxes, transaction costs, liquidity, short-sale frictions, timing differences and product-specific risks.

This version deliberately uses simple financing. It does not silently switch to continuous or compound interest. If a product, desk or source uses a different convention, convert the inputs under that documented method outside this page or use a product-specific model.

A careful futures fair-value workflow

1. Identify the exact spot or reference asset, futures contract, valuation time and expiry.
2. Verify whether the product convention uses simple, compound, continuous or another financing treatment.
3. Convert financing, storage, insurance, dividends, coupons or benefits into a compatible documented basis.
4. Enter only aggregate point adjustments that use the same price units as the spot reference.
5. Compare the theoretical estimate with the observed futures price without calling the difference risk-free profit.
6. Refresh every input when prices, rates, income expectations, expiry or contract specifications change.

Assumptions and limits

• No live spot price, futures quote, interest rate, dividend, storage cost or contract record is connected.
• The simple annual financing convention may not match the exact exchange product or market practice.
• Entered costs and income are aggregate expiry-horizon points; their within-horizon timing is not modeled.
• Taxes, settlement mechanics, delivery options, convenience yield, credit, liquidity and short-sale constraints are excluded unless entered as compatible points.
• A theoretical value is not an executable quote, guaranteed convergence price, arbitrage test or forecast.
• The calculator does not determine suitability, position size, margin, risk limits or an order decision.

Where to verify carry and rollover inputs

Start with the exchange specification and the exact delivery month. Confirm the contract unit or multiplier, quotation scale, currency, settlement method, last-trading date, first-notice date where applicable, delivery terms and whether a quoted index, cash asset or deliverable basket is the correct spot reference.

For carry analysis, document the rate source, rate date, compounding convention, day count, collateral assumptions and timing of dividends, coupons, storage, insurance or other benefits and costs. Do not mix annual percentage rates with aggregate price points or copy an equity-index convention into commodities, FX or rates without reconciling the product model.

For roll analysis, capture the nearby and deferred contracts at the same time and distinguish settlement, last and executable bid/ask prices. Confirm whether the entered commission covers closing and opening legs, then add expected spread, slippage, exchange, clearing, broker and any other relevant charges.

Sources and methodology

• CME Group — Calculating Fair Value — Supports a cash-plus-simple-financing-minus-dividends fair-value illustration and the distinction between theoretical and actual futures values.
• CME Group — Credit Futures Analytics User Guide — Supports futures notional, premium or discount, compound fair value, implied financing and nearby roll fair-value concepts while demonstrating that conventions can vary.
• CME Group — Deconstructing Futures Returns: The Role of Roll Yield — Supports near-minus-deferred roll adjustment and the warning that roll adjustment alone is not an instrument return.
• CFTC — Futures Glossary — Defines basis, contango, backwardation and rollover.
• CFTC — Funds Trading in Bitcoin Futures — Explains how a contango roll can require selling the expiring contract below the deferred purchase price.
• CME Group — What Is Equity Index Basis? — Connects basis with financing costs and expected dividends in equity-index futures.

The operational contract is Entered Futures Carry & Roll Analysis version 1.0.0. Independent fixtures and tests cover forward and inverse simple-carry arithmetic, 360- and 365-day bases, signed financing rates, income greater than costs, long and short rollover directions, contango-like, backwardation-like and flat entered curves, zero and negative futures prices, transaction costs and invalid inputs. Sources support definitions and method boundaries; they do not endorse the site, verify user inputs or recommend a trade.