As a former S&P trader I can tell You that they are not precisely the same. We traded complicated system, giving four different signals during the day. When we switched from E-mini to big contract our losses were cut in half, no matter we used same risk-reward ratio (n contracts E-mini per 1 S&P contract). They are the same in principle, but different by nature.
I've looked at the historical data on programtrading.com. It appears they never have a negative fair value number. Sometimes the cnbc number is negative. Do they ever report negative numbers for fair value in program trading?
Fair value is always positive - no idea what the CNBC gnomes think they're doing. Fair value is essentially the premium over the spot price of the underlying physical that covers the cost of holding the underlying physical (in the case of index futures, the basket of stocks that make up the index) through contract expiration. So it's always positive because it's always a cost (i.e., no one pays you to buy and hold the physical). CNBC doesn't seem to compute FV or their supposed program trading buy/sell levels correctly, don't know why they even bother. If they show a negative value as FV then they're probably confusing fair value and premium - e.g., suppose (using round numbers to make it simpler) the SPX closed at 1200, fair value is computed at 3, but the futures are trading on Globex prior to regular trading hours at 1208. If they're confusing FV and premium they might then wrongly show FV as -5 (meaning that the current premium off the prior day's close is 5 points higher than the computed fair value premium). For practical purposes it has no meaning as fair value but is something of an opening indicator (i.e., if the futures are trading much different than fair value from the previous close then the equity market is likely to open that way and possibly gap open in that direction - doesn't mean it will hold in that direction though of course).
CNBC's number for FV is really the difference between FV and the futures (you can read their whole spiel at the programtrading.com site. This has always been a pet peeve of mine, since they confuse everyone, and when they get to us, we have to "un train" them before we can go forward.
Thanks guys. Today was interesting. When I saw the cnbc number at programtrading.com they showed -17. I knew that wasn't right so I used HL Camps. Well, I got filled on 4 of the 6 open only orders I put in. (2 W and 2 L but net positive). Although I think it had more to do with the strength of the day than the FV I used. All were short.
Don said: Either one is fine for the average trader. I disagree. The big contract gives much clearler signals if you trade off of Market Structure signals. The ES tends pump around wildly and will frequently not show a clear Market Structure signal. I think its best to have both. With ES you get TOS, and watching the SP ticks and how the ES TOS reacts to those ticks, and even how SP reacts to the sometimes irrational exuberence of ES can be telling as well. When ES flip flops around the SP tick does it bias one side more than the other? Does ES respond to or anticipate an SP tick? These questions can only be answered if your looking at both. Why would skimp on a couple of bucks? Your only talking about one ES point on one contract. SW Antares Equity LLC
I have both, and don't use either for "setups" ..I prefer to rely more heavily on the live voice feed "squawk box" from the pit. When I said "most traders" etc., I meant that if you're looking at the FV premium/discount vs. last price for immediate entry/exit points then either "tick" will do. Your points are valid and well taken however!! Since we use the S&P's primarily as a leading (instant) indicator for trading equities, we have different agendas in mind. Good comments....
Has anyone ever attended the $2600 seminar these guys do about program trading? How worthwhile would it be for someone that is daytrading the eminis?