Difference Between SP Cash and Futures Price

Hi,

I have noticed there is a difference between the SP Cash Index and the Futures Contracts. And the closer the expiry date then the more narrow the gap gets.

e.g Lets say cash SP 500 is 2000, and 90 - 120 day next future contract is 1970.

If I was short the futures contract at 1970, and lets assume that the market did not move at all.

Would I then loose money, as the futures contract's price got closer to the cash, as expiration get nearer.

Thanks

The future is priced lower because of a dividend payout before expiry date...

Theoretically, if you short a future, you will always 'win' because you gain the interest difference when the future price converges to the spot.

When a future is prices lower, like in your case, there will be a dividend payout and when the underlying stock(s) go ex div, the index spot will drop by the dividend amount.

Roughly speaking, F = Spot + Interest - Dividends

Another reason for the future to be priced lower than the index spot is if one or more underlying stocks are not shortable, or expensive to short.