thank you raker I want to know how much the spread of big company like GE will influence the index ? any way to calculate it?
I believe what your talking about is it's component weight in an index and not the spread ? As of today GE has a weighting of 1.80% in the Dow Jones 30 index and is ranked 25th . In the S&P 500 GE is ranked 2nd with a weighting of 2.38% . This information and related material such as dividend analysis and capitalization analysis can be found on this website : http://www.indexarb.com/ The weighting systems of the Dow 30 and the S&P 500 are calculated differently thats why in one index it is no. 2 and the other its 25th. As far as the spread goes , when it comes to these large companies with good liquidity spreads are usually pretty narrow and don't usually have a bearing on the index , however its overall price movement will have an influence on the movement of the S&P 500 index as its weighting is pretty strong in that index...
Spreaders on the Big S&P floor keep the little and the big contract in line and scalp the difference between the big contract trading in dimes and the little contract trading in quarters, also top step locals, if the price goes against their position will hedge their loss by going the other way in the mini, if they can't force the price where they need it to go they eventually "puke" the position!
Hi guys and gals Newb here. Jasonn, I totally agree. The ES is essentially pegged to the big contract, and the big contract is calculated by its components. So... Is price action of the ES reliable? Can buying and selling of the ES really affect its price? Can the bears and bulls fight over it, or the SPX for that matter? I say no. They can only fight over the big contract components. Outside of that, SPX and ES price action is simply an accounting of shares traded. Market makers have very little control/impact of either contract.
I disagree totally. Price action on the ES is as good as your going to get as far as a proxy to the SPX. The SP doesn't move the ES, the ES is FAR larger as far as dollar value traded goes. Arbitrage guys can sell basket of stocks against the ES that they simply can't on the big contract speed/liquidity wise. Thats ultimately what keeps the ES in line with the SPX. What ultimately moves the ES is the underlieing stocks, its a derivative... Of course there is a pure noise element involved as the ES hovers around fair value and all the players do their job. IMO most retail traders have no business trading the ES when most don't need the liquidity. Unless your too big to trade YM or NQ it makes no sense to pay over double the tick size.
I agree. This is why I trade NQ rather than ES. At least NQ's tick size is proportionate to that of the larger contract.