A.I.M. Users Bulletin Board

[lrp42]

Aimster, thanks.

This article explains it very well. The "Cash is King" section and the "Fair Value in Action" example they used for April 12, 2000 are very clear to me. Basically it accounts for the borrowing costs in owning the future contracts versus owning the actual stocks, plus the amount of dividends that the futures contract owner forfeits and doesn't receive when it calculates the current futures contract value to the current index value.

I have referred the article to my son. Now when he listens to CNBC on satellite radio on his way to work he will understand what they mean when they use this term.

The section about how the arbitrageurs try to make a point or two out of its use is way out of my league. More power to them if they are successful in their efforts. To me it looks like it is a hard way to make a living.

Again, thanks a lot.

Ray