Rationale behind the constant 35 for 0% interest rate

Options & Futures
1

Course Name: Options Trading Strategies In Python: Intermediate, Section No: 7, Unit No: 5, Unit type: Notebook


Since interest rate is considered 0%, 35 is added to the nifty price to get the Nifty December futures price._


What is the rationale behind? Where is the 35 comes from and how it would change if interest rate would be e.g., 4%?

Any hint appreciated

 
2

Hi Tomas,



As we have taken the interest rate as 0%, 35 is added to take into account a fair estimate of the December futures price when the November contract expires. So basically, we are assuming that the Nifty December futures would be trading at a premium of 35 points at the time of the November series expiry. If the interest rate is taken as 4%, then there is no need for this assumption. But if this rate of 4% is the annual rate, it should be adjusted based on the days to expiry of the contract.



Hope this helps!



Thanks,

Akshay

3

Thank you, Akshay, for clarification!



Regards,



Tomas