Future Fair Value

or in other words its mark to market..  is that what your referring too?  or do you mean this from an accounting aspect?

Futures and market to market is as follows:

refers to the relationship between the futures contract on a market index and the actual value of the index. If the futures are above fair value then traders are betting the market index will go higher, the opposite is true if futures are below fair value.

from an accounting aspect which overlaps in the market aspect...

Critics argue that fair accounting regulation added to the volatility in financial markets and aggravated financial crisis. On the other hand, supporters of this regulation argue that fair value accounting has been the victim of the recent financial crisis. They believe that this regulation is important for providing transparent, reliable, and accurate information on asset values to investors.After evaluating the impact of fair value accounting regulation on financial crisis, we examine negative and positive aspects of this regulation. Our discussion shows that fair value accounting provides useful information during stable market conditions, but its usefulness may become questionable during unstable and volatile financial markets. Overall, this regulation has the support of financial professional bodies. Some professionals are, however, concerned about recent modification to the fair value accounting rule, i.e., FAS 157-4, because this modification may not enhance reliability and accuracy of financial information. Despite recent modification, discussion on fair value accounting is far from over. Critics of the regulation still believe that this regulation should be eliminated, but the positive aspects of this regulation support its continuation.

hope that helps.

The "fair value"  refers to the relationship between the futures contract on a market index and the actual value of the index. If the futures are above fair value then traders are betting the market index will go higher, the opposite is true if futures are below fair value.

In the futures market, fair value is the equilibrium price for a futures contract. This is equal to the spot price after taking into account compounded interest (and dividends lost because the investor owns the futures contract rather than the physical stocks over a certain period of time.

Quote:

Originally Posted by panda16 

no i'm not trading futures. i just like to know things and i stumbled upon the pre market page on cnbc and read the article on fair value and future contract and that wasnt of any help to me so i pursued it further and a couple more websites contradicted each other so i figured i would just ask on here.

Gotcha. Did I explain it so you can understand it? Sometimes something that is obvious to me is not to others and vice versa. Let me know if it's not clear and I can try to do a better job.

Quote:

Originally Posted by panda16 

yes the explanation was fine. What does it mean when it says Future Fair Valie (-2.14) or any number plus minus?

During the trading day, when the S&P 500 index and the futures trade simultaneously, the S&P 500 futures contract usually moves in a fair-value relationship to the S&P 500 index. But occasionally, the S&P 500 futures contract may trade above or below its fair value relationship to the S&P 500 index. Hence, you see the plus/minus relationship.