I used to also wonder about this a long time ago when I first traded QQQ, then moved to NQ. Back then, I had no idea.
Well, that's easy: Algos. The harder question is, which controls which? I would think the spot price dictates derivatives like NQ. But if you've witnessed the Flash Crash, you would also know the futures can ultimately spill over into the spot market and create havoc.
Interesting, where you getting 36.75 from? I'm a day trader on the 5 min chart. Every 5 min candle I've compared it's more like 42.
Okay, "algos" sure. But you've got different sets of people trading each. Not everybody who buys in and out of QQQ is also in the futures market. You might get some huge order in the one that ain't equally placed in the other. So how the hell do they stay so synced?
The setups I use are penny neat on QQQ oftentimes. That won't be the case at all with NQ so I'm wondering if it's dumb eventually to just trade NQ but off QQQ signals. And if they ever decoupled, I'd have some extra work to do.
Yep, that's close to what I've found. It's been 42.58 or so for me, aka $850 for every dollar move of QQQ. But how the hell do they track so consistently, ESPECIALLY when you consider the one trades times the other don't.
That sorta makes sense. So if I'm understanding you're basically saying the syncing is consciously executed and monitored to prevent arbitrage opportunities, but why do the HFT guys care? I don't get what the interest in keeping them aligned stems from.
Whichever one has more notional volume per day (ie multiplier * price * volume) is usually the one driving the pricing. For example, in case of S&P500 it’s gonna be spooz
HFT guys frontrun the basis/ETF-arb guys - they know if dislocation is big enough, the guys who can hold inventory will get involved. So they know they are back-stopped