Has anyone written a program that arbs the SP vs. ES? Since the ES only trades in 1/4 point increments and the SP trades in 1/10 point increments seems as though there is an opportunity to possibly create an automated system to arb. the 2 contracts under certain conditions. In other words, you get 2 1/2 ticks for each tick in the mini (ie. bid/buy 1265.25 in ES, simultaneously sell/ 1265.30 or 1265.40 or maybe even 1265.50 in SP). Any success?
My guess would be this is too obvious to work correctly, but who knows. I also recall the squawk box guy i listen too laughing at someone in the pit arbing a nickel, nickel nickel, and then losing a quarter over and over.
Lichtenstein wrote an article on arbing the spooz in Futures Feb. '06 issue, p. 38 www.futuresmag.com
You need to be in the pit to do this. A local will not willingly make a market that is outside the market of the mini.
You may want to re-state that. SP locals frequently make markets outside the Mini. That's how the spread works for them. The pit buys .40's on an ES .50 bid.
Right, I meant that a local will not offer .40's when the mini is .50 bid. He will always bid below and offer above the mini-market.
That's why maintaining different tick sizes betweem ES and SP is a rip-off. I'm not a pit trader, but I carefully tested identical strategies on both ES and SP. The SP turned out ALWAYS to be significantly more profitable. I can only explain this by profits being constantly syphoned away from the ES to the SP.