Dramatic Shift In Prem Below Fv

Discussion in 'Index Futures' started by gqguy2003, Jun 6, 2008.

  1. For those who watch the PREM today (FRIDAY JUNE 6) was a classic reason to remain short all day. A simply plot of Fair Value which was .37 showed the S&P Premium remarkable shifted below fair value all day long. Little wonder the market stood no chance of a significant retracement all day long.
  2. You plotted the pit S&P premium $SPINX, these days most traders look at the ES premium $ESINX.
  3. Most traders .... ES Prem? And how would you know what most traders do? And what about the Nasdaq Prem and the Russell Prem? Your point is?

    The point is we track all premium feeds, S&P Prem, the ES Prem, the Nasdaq Prem, the Russell Prem and they all shifted down. Few traders pay any attention to the premium and even fewer have a clue on how to read it correctly. Do you? And if so please tell us. Tell the world. Im sure we would love to hear your explanation.
  4. Well Mr Expert analyst/trader, I tried to help you out with matters of general preference and consistency and all I get is grief for my effort.

    Please do whatever pleases you as what I do obviously doesn't.
  5. So is that an admission that you dont know how to read the premium?
  6. I haven't used PREM much myself, but I'm wondering where one might find the levels at which buy/sell programs kick in for the nasdaq, russell, etc?
  7. You can calculate them yourself or look here:

  8. There are two ways to use prem to frontrun the bigmoney.

    Talking to the players is always very helpful. They are habitual in their orientation.

    If you want to ramp up fast (I can see the past posters are very unfriendly as far as having an objective discussion) on your own, you can do it with some script.

    If you want to use a strategy and frontrun bigmoney, the best way is to add volatility to your approach. Here a non stationary display is called for. In this case you get a 30 second to more than a minute leading indicator BUT you have to make a display adjustment to take out the above scripted observables.

    If there is no flack generated by this post and you are interested I will get you up to speed.
  9. Not sure what you mean by non stationary display, but I'm interested.

    Thanks for the site, I'll look it over later.
  10. Equalizer gave you the starting point for the script.

    After the market opens it goes through a few minutes of reaching the indexarb.com premium value that was calculated BEFORE the open.

    By taking the difference (as an absolute value) of the offset and the PREM, you get to see the drift. The drift from this ZERO centered value occurs as the day unfolds. It happens so the drift becomes a point then in a while two points etc. I am speaking about the value that is located in the placeholder to the left of the decimal point.

    You can see this going on with a display if you wish. If you talk to people, say in Chicago, that are associated with CBOT and CME, you will get expressions from them about what they do regarding this drift. They are talking to you about imbalances and they feel that these will be corrected. They act on these kinds of beliefs either on the floor on electronically nowadays.

    So to ace these and other people, you have to know how to read the drift in a more sophisticated way. Volatility is how this is done. You set up a display that has a window of a certain width and where part of it is the future (that is the NOW part of the display is not right up against the right side of the window).

    Periodically, you display a bar showing the volatility during that period of time. The bar is the difference between the PREM and the current offset and it is centered on ZERO and periodically adjusted for the drift. I use what I know from "the club" to do the frequency of the drift adjustment. You can find this out by observing as I mentioned above. You will simply calibrate yourself fairly quickly.

    Connors-Hayward introduced an absolute measure of volatility compression a while back. We improved that to make it tell us much more, and namely a leading indicator of price breakout which is vector oriented. Vector means you know which direction.

    What I do is also add into the picture a "noise" filter. This in common parlance is a thing that removes "freakout" from trading. You can read on a topic called chop and how it caused whipsaw among ignorant traders. My favorite victim of this is trader28.

    So by having nice bars that are of a short period that matches Change in the DOM, T&S and Tic charts, and by having a ZONE centered for "noise" filtering, you are ready to observe volatility compression and what follows. What follows volatility compression is a price BO caused by big money traders entering the market to capitalize on drift corrections that they feel will be coming up.

    How is what follows volatility compression expressed on this non stationary display? the compression proceeds and it gets so apparent that it is inside the "noise" boundary. This means it is "centered" AND the DRIFT has stopped accumulating. THEN a volatility expansion occurs and the expansion is NOT centered but is showing what is called a "strech" or "squeeze" by moving to one side or the other of the ZERO.

    If you know that "smart big money" moves ahead of the herd, then you know what each of the stretch and squeeze means.

    There are other signals that lead price as well. The four that work along side this one all corroberate one another so you never have any feelings of not "knowing that you know".

    The way it turns out is that what I am using and how it is described above is not followed by those who cannot understand it. Not being able to understand something is often used as a criteria for drawing a wide assortment of additional conclusions.

    One concluson that you can draw is this: It is nice to be sitting in a place where you can frontrun the smart money in terms of timing and direction using leading indicators of price.

    The type of precision attainable can be characterized as: given 190 data points where a three point range of ES occurs about 11.25 points may be extracted. This is just a portion of RTH.


    Above you see several leading indicators of price. At the time shown a comression is over and the volatility expansion is showing a LONG trade.

    By looking at the PREM deal at the bottom right you see the black high volatility bars (several) and you see the WALL on the DOM stalagtites that price is bouncing off of. On the tic charts you can see the "turn" as well. It is not probably clear that bigmoney is piling into the T&S 50+ display.

    The PREM display shows the two ingredients of the PREM display arithmetic as well.
    #10     Jul 23, 2008