This arises because the theoretical cost of buying all 500 stocks in the S&P index differs from the cost of purchasing the S&P futures contract. The latter has no cost beyond its face value....

This arises because the theoretical cost of buying all 500 stocks in the S&P index differs from the cost of purchasing the S&P futures contract. The latter has no cost beyond its face value. Obviously, one reason for the difference is the cost of borrowing, or opportunity cost, to purchase the index.