Currently, the SPX is 3044.3 and the ESM2020 (JUN 2020) is 3043.50.

Can someone explain to me how the E-mini quote work? I am not asking about the profit/loss calculations but how do I assess this 3043.50 whether it being overvalued or undervalued as compared to the SPX?


Spot–future parity

Future Price as of Today = Index Price as of Today + Risk Free Return (Treasury Bond Yield) - Expected Dividend until Expiry

Therefore, the 0.03% difference for June contract is (Treasury Bond Yield - Expected Dividend), which is negative, meaning that Expected Dividend > Treasury Bond Yield.

To determine by youself whether ES is overvalued/undervalued requires the knowledge of "unexpected changes to dividend", and for farther expiry, the "unexpected changes to treasury bond yield".

Because if you find ES overvalued, you can buy S&P 500 actual stocks on margin borowing (at treasury bond rate if you can) then short ES, and upon expiry you will have a profit.

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