Why future price differ from spot price and why the price of çurrent month differ from next month…

Futures price is the one Stock will eventually reach on expiry day. same applies to next month also.

if Future price is less than stock then stock may go down in the next few sessions.

Futures Price = Stock Price - Dividend + Interest to hold one lot of Stocks

Hello,

The futures price is the expected spot price on expiry at any given point in time. This expected price can either be higher than the spot price, at the spot price or lower than the spot price.

Also, there is a Futures pricing formula that determines the futures price with respect to the spot price of a scrip.

If the Spot price is 500, then the futures price is 503.43 according to the formula. Let’s see how.

This is the formula:

Futures Price = Spot price * [1+ rf*(x/365) – d]

Where,

rf = Risk free rate per annum

d – Dividend

x = number of days to expiry

If a scrip is at 500, rf = 8.35%, x =30 days and d = 0.

Now, the Futures price = 500 * [1 + 0.0835(30/365)-0] = 500 * 1.00686 = 503.43

This is the fair value of the Futures. The market value of the Future could be different due to transaction charges, taxes etc.

To know more about the pricing formula and a practical application of how to benefit from a calendar spread, this Varsity Chapter on Futures Pricing is a must read.