This question is about a leveraged trade involving index futures.

Let's use an example of buying two contracts YM futures and selling three contracts RTY futures. CME will give the trade a margin credit under the variance margin rules (SPAN). This is the current hedge ratio and so it will earn ~75% margin reduction. These are "front month" contracts.

Now, the question is, to what extent will the convergence in the futures basis spreads (fut - spot) affect the outcome of the trade?

I understand that the futures will converge to the value of the underlying stocks as settlement approaches, and this will affect long and short positions (futures) differently.

Will this be a significant amount of money over a timeframe of say a few days, weeks or months?


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