I know many of the guys here follow Don's strategy in envelope trading on NYSE, taking advantage of Specialist. To make things simple at first, I start with the 28 Dow Jones Industrial Average component stocks, and plan on model fair-values based on the ES and YM. One problem that I bump into is the update of data from different sources. What are some of the fundamental ratios that you guys put into the model to gain greater insight on trading (book-value, P/E, P/CF)? and how and what do you make updating most easily done?? (any data stream in excel file already?) Thanks for sharing your opinion
I think you have the wrong idea of how this strategy works. It's not based on ES or any futures/index although having a built in futures % movement isn't a bad idea in case of a large spike. Book value, P/E etc are not of consideration. Enveloping is just setting a buy and a sell a certain % away from the inside market hoping to get a nice trade-through print. This also means that you can get dangerous fills on any of your stocks that release news during market hours. Also consider that the NYSE hybrid model could greatly affect this strategy in the coming months.
I think you have confused two strategies. "Opening only" and "enveloping". OO uses a form of envelope that is based on fair value and the difference between the SPX and the SP500 futures just before the NYSE open. Enveloping is just what Dustin described. If you read Dons Opening only thread, you will figure it out. Or I could just tell you, but that would be soooo "un ET" PS In all seriousness, search out posts by mschey and lescor, they are the real deal when it comes to OO. Good luck.