Cash index

An index contract quoted around the current level of the index itself, with no expiry, also called a spot index. Because there is no expiry to carry the cost of time, a position held overnight attracts a financing adjustment, and a dividend adjustment applies as constituents go ex-dividend. The alternative is a contract priced from the listed future, which carries a stated expiry and is rolled.

The quoted level is derived rather than observed. While the constituent shares are trading, the index calculation itself supplies the reference. Outside those hours there are no constituent prices to calculate from, so the quote is taken from the listed future on the same index, adjusted for the financing and dividends between now and that contract's delivery. This is why a cash index quote can move overnight even though not one of its constituent shares has traded.

The trip is expecting the cash quote and the futures quote to agree. They do not, and are not meant to: the future prices a level for a date in the future and therefore embeds carry to that date, while the cash instrument prices now and charges that carry a day at a time. Over a short hold the two are close. Over a long one the costs arrive by different routes, and practitioners disagree about which of the two is the fairer reference out of hours, since one is a real traded price in a thin session and the other is a calculation with no trading behind it.