Futures Fair Value Calculator
Index futures fair value is the no-arbitrage price implied by the cash index, the cost of financing a position to expiry and the dividends the index pays before then. Traders compare the live future to fair value to judge whether the market is signalling a higher or lower open. This calculator uses the standard simple-interest cost-of-carry formula. Enter the cash index level, the financing rate, expected dividends and the time to expiry.
Futures fair value formula
Fair value = index * (1 + r * T) - dividends
Basis = fair value - index
where r = financing rate, T = years to expiry, dividends = points expected before expiry
The rate r is entered as a percentage and converted to a decimal. This uses simple (linear) interest, the market convention for short-dated index futures fair value quotes.
Worked example
Cash index 5,000, financing rate 5%, expected dividends 30 points, time to expiry 0.25 years (three months). Fair value = 5,000 * (1 + 0.05 * 0.25) - 30 = 5,000 * 1.0125 - 30 = 5,062.50 - 30 = 5,032.50. The fair value basis is 5,032.50 - 5,000 = 32.50 index points.
Futures fair value: frequently asked questions
What is futures fair value?
Fair value is the theoretical, no-arbitrage price of a futures contract given the current cash index, the cost of financing the position to expiry and the dividends expected before expiry. It equals the index plus the net cost of carry: financing cost minus dividend income. The actual futures price oscillates around fair value.
How is index futures fair value calculated?
With simple (linear) interest: fair value = index * (1 + r * T) - dividends, where r is the financing rate, T is the time to expiry in years, and dividends is the total dividend amount (in index points) expected before expiry. The premium of fair value over the index is the basis.
Why does fair value matter before the open?
Commentators quote fair value to gauge whether the futures market is signalling an up or down open versus the prior cash close. If futures trade above fair value, the implied open is higher; below fair value, lower. It separates carry from genuine sentiment.
Sources and method
- U.S. Commodity Futures Trading Commission, education on futures: CFTC: Learn and Protect.
- Method: the standard cost-of-carry fair value identity for index futures; a public derivatives result. No proprietary data is used.
Reviewed by the CalculatorHub team, edited by James Graham, 19 June 2026. See our methodology.