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Pragmatic Capitalism

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Is buying S&P futures basically buying SPY but with free leverage?

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Posted by bhcohen1
Posted on 12/06/2016 5:16 AM
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Oh no. Futures aren’t free at all. In addition to execution fees you pay a holding cost usually referred to as the “roll cost”. This can vary and generally doesn’t amount to much more than 10-20 bps per year. But it’s not free by any means.

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Cullen Roche Posted by Cullen Roche
Answered on 12/06/2016 9:18 PM
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    Right but roll cost is different than paying for leverage like with margin interst or premium in options. You control a lot of $ for free eseentionally in futures, right? That is different than futures containing risk.

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    Posted by bhcohen1
    Answered on 12/25/2016 6:28 PM
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      You’re paying for the leverage in both cases. They just call the costs different things.

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      Cullen Roche Posted by Cullen Roche
      Answered on 12/26/2016 1:38 PM
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        Futures, especially stock futures, are cheaper than borrowing on margin, yes.

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        Posted by MachineGhost
        Answered on 12/27/2016 3:29 AM
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