How does the fair value of Ethereum futures compare to the spot price?

3 answers

• Dec 25, 2021 · 3 years ago
  The fair value of Ethereum futures refers to the theoretical price at which the futures contract should be trading based on the current spot price, interest rates, dividends, and other factors. It represents the market's expectation of the future price of Ethereum. The spot price, on the other hand, is the current price at which Ethereum is trading in the market. The fair value of Ethereum futures can be higher or lower than the spot price depending on various factors such as market sentiment, supply and demand dynamics, and market participants' expectations. It is important to note that the fair value of Ethereum futures is not always equal to the spot price, as there can be deviations due to market inefficiencies and other factors.
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• Dec 25, 2021 · 3 years ago
  When comparing the fair value of Ethereum futures to the spot price, it is important to consider the concept of arbitrage. If the fair value of Ethereum futures is higher than the spot price, it creates an opportunity for arbitrageurs to buy Ethereum at the spot price and sell futures contracts at the higher fair value, thereby profiting from the price difference. This arbitrage activity helps to bring the fair value and spot price closer together. Conversely, if the fair value of Ethereum futures is lower than the spot price, arbitrageurs can sell Ethereum at the spot price and buy futures contracts at the lower fair value, again profiting from the price difference. This arbitrage activity helps to reduce the deviation between the fair value and spot price. Overall, the fair value of Ethereum futures and the spot price are closely related and tend to converge over time due to arbitrage opportunities.
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• Dec 25, 2021 · 3 years ago
  The fair value of Ethereum futures can be calculated using various pricing models, such as the cost of carry model or the Black-Scholes model. These models take into account factors such as the current spot price, interest rates, time to expiration, and volatility. By plugging in these inputs, the fair value of Ethereum futures can be estimated. It is important to note that the fair value is just an estimate and may not always perfectly match the actual trading price of the futures contract. Market factors and participant sentiment can cause deviations between the fair value and the spot price. Traders and investors closely monitor these deviations to identify potential trading opportunities.
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