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Let's say I'm going to buy in the market to hold. What are the pros and cons of buying MES futures instead of SPY ETFs for exposure to S&P500?

From a high level I know that MES is $5 per point and that SPY is (roughly) $0.10 per point but we can equalize that by equating 50 shares of SPY against one MES contract.

Holding MES would miss out on dividends and there'd be transaction fees of rolling out of each expiring contract into the next.

Assuming one portfolio consists of 1 MES contract which is rolled over into the next expiry when applicable and another holds 50 SPY contracts, which will end up higher at the end of a few years?

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Spot–future parity There is no free lunch for buying a contract of MES with only the minimum margin requirement. You have also to buy a Treasury Bill/Note of close to full notional value of MES to address the Risk Free Rate component of the spot–future parity. For the case of MES, it would be difficult to find such a small amount of Treasury Bill/Note.

Short Term Capital Gain If you are from some countries like the USA, profit/loss from rolling or buying/selling MES every 2-3 months would taxed as 40% Short Term and 60% Long Term Capital Gain tax.

Non-Resident Alien Withholding Tax The anticipated decrease of stock points as a result of anticipated Ex-Dividend is already priced in when you buy MES. If you are not from the USA, you will not have to pay 30% Withholding Tax on Dividend if you buy MES.

Transaction Fee Most brokers are now free to buy SPY. MES, however, likely still cost money.

SIPC and CFTC The Cash Collateral parked at the broker are subject to special protection that is less favorable than SIPC.

Trading Hours MES could be traded during more hours, in addition to the Pre-market and After-hours SPY trading sessions.

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