dow futures

Discussion in 'Index Futures' started by suburbantrdr, Feb 20, 2008.

  1. I have a question that has been nagging me for months. I am a bond trader but obviously look at the ES and the YM in the morning before the dow open. Can someone tell me what determines the spread between the YM and the dow cash on any given day?

    Sometimes it tracks very closely while some days (like today feb 20) the cash is around 50 ticks stronger than the YM.
  2. It may have to do with dividend payments, Fed Funds rate changes and/or the new additions/deletions to the index.
  3. It seems to find where it is going to be for the day within the first 10 or 15 minutes with regard to the price difference for the day.

    If this is the case is it possible to determine where this price difference will be for the day before the open?
  4. maxpi


    That price difference is said to be very useful at the end of the day because the futures are settled daily. I have not quite delved into that enough to know what to do with it but it's got to be some easy money once a day if mastered....
  5. maxpi..I keep thinking the same thing
  6. Since the futures and the cash of each of the DOW stocks trade on different
    markets they really only reflect what traders think it is worth right now.

    Remember the March futures contract is a traders opinion of what the DOW
    Jones average will be on the day the contract expires. Eventually the price
    has to converge since they settle in cash. But on a given day the DOW could
    be up 80 and the Futures up 30 because they are saying the market will be
    such and such on March.
  7. So on the final day of expiration, or even the day prior, there should be a merging of the two, correct? Therefore a somewhat significant profit opportunity?
  8. tortoise


    1. Yes
    2. No