Somewhat cryptic but that was the "S&P incr %" number. It looks like IBM not only opened lower than the expected fair value but also lower than the previous close. I wonder what's up with that.
I think that is what he means by 'SP500 increase'. It is my understanding that most people here are not factoring in beta. If all your stocks have similar beta, the envelope takes care of that.
Small, a bit disappointing considering the gap up. 3 fills, all small winners +$300. And, from our basic workbook. SPX Spot Price (close) 1540.00 Fair Value from Trading info: 11.10 Net Valuation âNVâ 1551.10 Futures are trading: Globex 1562.80 Subtract Net Valuation 1551.10 Amount Over Fair Value âPremâ 11.70 Divide 11.70 by Spot 1540.00 Percentage market is opening up: .007 $25.00 x .007 Stock Fair Value = 25.19 Now we envelope that 25.19 price. I prefer, on days like today, to not put in buy orders (don't want to buy a weak stock when we are expecting a quick pullback). All the best, Don
Where does that Net Valuation number come from? Is that a homebrew calculation of the SPX based on closing prices? I'm not sure why the % increase comes from 11.7 / Spot rather than 11.7 / NV. Do you all set a max loss on these types of trades?
NValuation is simply the spot price plus current fair value (you can check the spx FV number here: www.stocktrading.com/Tradinginfo.htm daily if you like.) You get a sum of where the futures "should" be trading if the market were to open up exactly flat, with no premium or discount to Fair Valuation (based on cost of carry (interest), and time until futures expiration). Basically we see how much, percentage wise, the market will open up or down...and assume the stocks "should" open in that range....if they open above by a set amount, or below by a set amount, we want to either sell short or buy the stocks (with the NYSE specialist who must accomodate these excesses). Don
You seem to envelope by 0.5 fix but I think most people envelope by a %. I envelope by between 0.7% and 1.2%. Depending on the futures. On flat days it's 0.9% both sides. I also have special adjusments for some stocks (when I get to know them).
Thank you - I just realized I had left that fixed in there as it's one of the areas I want to work on improving. Hopefully I can stop short of making it worse
On big up days, use smaller envelope (.1 or .2) because your FV price is already way up...and you don't want to be so far away from previous closing price to not get filled. .5 is for flat days, generally a 15-25% fill rate. FWIW, Don
not sure if this is off topic... but does anyone know where i can find guidence/ helpful tips on automating this strategy using excel? I currently use rediplus as my execution platform. All i need to do is execute my entry and then offer/ bid to scale out of my position. I've read that excel can do this, I just can't find any documentation on how to program it. thx.