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SPX to ES and NDX to NQ: The Futures Basis, Explained

Why an SPX level is not an ES price: what the futures basis is, why it drifts in the session and resets at the quarterly roll, and how to convert a level.

By GammaTape6 min read

Every gamma level computed for the S&P 500 comes from SPX options, so it is an SPX price. Most of the traders who read those levels trade ES. The two move point for point through the session, but they are not the same number: the gap between them is the basis, and a level carried from one chart to the other without it lands in the wrong place. The same is true of NDX and NQ.

What the basis is

ES is a future on the S&P 500; SPX is the index itself. Holding the future instead of the stocks means you do not pay for the stocks today — the cash stays with you and earns interest — and you do not receive the dividends the stocks pay before the future expires. The fair value of the future prices both: the index, plus the financing cost until expiry, minus the dividends expected until expiry. The basis is the future minus the index. NQ and NDX work the same way, with the Nasdaq-100’s own, smaller dividends.

  • Basis = futures price − index price, read at the same moment.
  • Fair value ≈ index × (1 + r × days to expiry ÷ 360) − dividends expected until expiry, where r is the short-term financing rate.
  • When the financing rate is above the index’s dividend yield, the basis is positive: ES above SPX, NQ above NDX. When it is below, the basis can turn negative.
  • An illustration with round numbers: an index at 6,000, a 4 % rate, a 1.3 % dividend yield and 60 days to expiry give a fair-value basis of about 6,000 × 2.7 % × 60 ÷ 360 ≈ 27 points.

Why it drifts through the session

Fair value itself moves slowly: one day less of financing each day, and a step whenever a large group of stocks goes ex-dividend. The basis you can measure on a screen — the last ES trade minus the last SPX print — moves minute by minute. The index is calculated from the last trade of each of its stocks, so at the open, before every stock has traded, it lags, while ES has been trading all night. During the session, order flow can push the future a little rich or cheap to fair value before arbitrage pulls it back. After 16:00 ET the index stops and ES keeps trading, so there is no live basis to read until the next open.

Why it resets at the quarterly roll

ES and NQ expire every quarter — March, June, September and December, on the third Friday. As expiry approaches there are fewer days of financing and dividends left to price, so the basis shrinks toward zero, and at expiry the future settles to the index. About a week before, volume moves to the next contract, which has three more months to run, so the basis on the contract most traders watch jumps back up on the day they roll. A basis written down at the start of a quarter is the wrong number after the roll.

Converting a level

  1. Read the basis now: ES minus SPX, or NQ minus NDX, taken at the same minute. A delayed index quote against a live future gives a wrong basis.
  2. Add it: ES level ≈ SPX level + basis; NQ level ≈ NDX level + basis.
  3. Read it again during the session, and always after the quarterly roll.
  4. Keep each future on its own index: SPX levels on ES, NDX levels on NQ. SPY and QQQ are ETFs on a different scale — converting them is a ratio, not an addition.

An illustration: if the SPX call wall is at 6,050 and ES trades 27 points above SPX, the wall sits near 6,077 on the ES chart. The positioning has not changed; only the price axis has.

Why a levels page differs from your ES chart

GammaTape’s public levels pages — the ES and NQ pages included — publish their levels in index points, refreshed every 15 minutes. A cached page cannot know the basis at the minute you read it, so it does not guess: add your own basis to read them on ES or NQ. If a level on the page looks a few dozen points away from where your ES chart says it should be, the basis is usually the whole difference.

Inside the product, the conversion is done for you. The MotiveWave extension measures the basis minute by minute from the futures bars on your own chart and draws every level at its ES or NQ price. On the web desk, a switch shows the levels in ES or NQ points with a basis you set, starting from a suggested value.

Related

Draw the levels on your own ES or NQ chart in MotiveWave, the basis applied minute by minute.

MotiveWave extension →

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