# Forward spot calculation for a dividend paying no-short sell ETF

I am trying to fit an implied volatility curve for options on the SSE 50 etf that has no borrow (no short selling allowed) and pays a single annual dividend. I originally thought I could use the future price (maturity is 5 days before the option with the same etf underlying) but the curve does not fit since the futures are in backwardation and the implied forward price from the options is higher than the etf spot. I do not know what the expected dividend yield is which is why I tried to calculate them from the forward- intraday it seems to vary a lot (positive and negative) based on the option implied forward.

future px = 2.5903

etf spot = 2.6329

option implied forward = 2.6574

I'm using the following equation:

d = r - ln(F/S) / tau

How should I be calculating the forward spot for a discrete dividend no borrow stock so that my put and call vol are somewhat aligned?

Thank you.

• Could you possibly provide the tickers of the instruments you are looking at? The etf itself (spot price) but also future and option chains? – Quantuple Jun 22 '18 at 9:58
• Sure. It's the 510050 SSE 50 etf on the Shanghai Stock Exchange. The option chain is also the 1809 chain traded on the SSE. The future is the IH1809 which is traded on the CFFEX. The 510050 etf pays an annual dividend of roughly 2% around 11/10 - 11/11 each year. – semiquant Jun 25 '18 at 0:10
• I re-did the dividend yield calculation based on the p18 equation math.nyu.edu/faculty/avellane/DSLecture3.pdf and the implied yield rate drifts towards negative only on open and close (as expected when markets are thin). There is a still a slight yield for the September options and I am wondering if this is can be attributed to the no-short selling rule on the underlying etf. From my understanding, the September forward should not have a dividend yield since expiration is ahead of November ex-dividend date. Is it cool to use the smoothed implied dividend yield in my curve fit? – semiquant Jun 25 '18 at 2:19