Arbing the Big S&P vs. the Mini..

Discussion in 'Automated Trading' started by NTB, Feb 13, 2006.

  1. NTB


    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?
  2. 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.
  3. duard


    Lichtenstein wrote an article on arbing the spooz in Futures Feb. '06 issue, p. 38
  4. NTB


    Thanks for the kind replys.
  5. Maverick74


    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.
  6. Pabst


    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.
  7. Maverick74


    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.
  8. 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.