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I'm confused over if I should use spot or futures price when targeting a certain exposure. There are many websites that state you should use the contract size * futures price. Other websites, however, says to use contract size * spot price (i.e. using es futures price vs ^spx index price).

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  • $\begingroup$ The spot price is dated today, while the futures price of today is "dated" as of the future settlement date in some sense. So it depends what kind of exposure you want to calculate, current or future. $\endgroup$
    – nbbo2
    Nov 14, 2023 at 20:41
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    $\begingroup$ It's for current. However, I saw that the CME says to use contract size * future price when hedging, so I'm wondering if that same principle applies here. $\endgroup$
    – JamieC113
    Nov 14, 2023 at 21:20
  • $\begingroup$ Yes I agree, future price when hedging, current price when you have a pile of cash and you want to "equitize" it i.e. earn an equity linked return on that cash. $\endgroup$
    – nbbo2
    Nov 15, 2023 at 9:09
  • $\begingroup$ thank you! do you think that bonds should be the same (i.e. using the face value at maturity instead of the futures price) $\endgroup$
    – JamieC113
    Nov 17, 2023 at 19:32

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If you enter into a futures contract, then your PnL exposure is to the price of that contract, because that is what determines the daily variation margin cashflows into your account.

Using contract size * spot price is only correct if you hold the futures contract until final settlement, when the final settlement price will equal spot. Even then, final settlement price and what you see as the spot market may not always be identical, due to different ways that final settlement prices are computed.

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