I wrote a little more in the Prem, Tick tread. There I stated that the prem never stays negatavive. Thats WRONG! the range CAN be in the negative; typical of downtrending and weak markets. if you look at todays 1/18/02 the first 1/2 hour showed a distinct change in the range, it started weak very negative -4 and the cranked it up to a new higher range. Not sure what fair value was but market was intrinsically weak...but it didnt stop the ramp job. So Always know the range and if the programs futures or cash is going to crank it up. Let them exhaust the move before going short. They love to jam it up and pull the rug. By the way, looking at the Prem on the big contract to cash; not the "Eprem" as the cash relates to the Emini.
In my "psuedo premium" I described above I have it negative (-0.1 down to -3) until after 10:00. Do you see any disadvantage to using the e-mini as I described? I'm actually hoping to use it to stop me from jumping in on moves just to see them tick back against me 2 points before heading where they were going. Most of the day I'm scalping 2-4 points and this backfill is always right at about my stop level.
So, Gotrader, you are obviously and pit trader at the Merc and therefore may be able to answer a question that i've been asking on the ET board for several weeks...but no one has been able to supply me with an answer. So, here it goes.... At the Merc, on the boards is the "Fast cash" quotes for both the Naz and the SPU. It is my understanding that this quotation is a faster calculation of the Indicies on a real-time basis. However the only cash qoutes I can find "off the floor" are only updated about every 6 seconds. (SPX and PREM, SPIN ) How can you possibly trade off these cash quotes(in the way you are describing) with that kind of delay. Also, please explain "fast cash" and where the Merc gets it. I am having the same problem is Vikana describes in her earlier post, while looking at E-signal quotes for PREM and $SPX. I am attributing this to the fact that $SPX is not traded and also NOT recomputed instantaneously, every time of the components of the Index moves. Am I correct? Thanks
LouiseJefferson, I think the "fast cash" is $IQX. You may have to pay for the full CME feed to get it. Just looking over it quickly, the 1min bars look pretty bad though, lots of gaps, etc. I don't watch it myself, so I may be wrong.
Gotrader, thanks. I think you have given me enough info to use the PREM in my trading. I also don't get the PREM for charting, but I think I can follow it close enough for now just watching FV with cash and futures since I try for larger swings instead of scalping, but using it with an osc indicator would obviously be much better.
Well if you're paying for realtime quotes, say $80+/mo, which I know many of you surpass, and your vendor cant provide one of the most important differentials in the market, then complain. Sheese even Qcharts has Prem! You shouldnt have to do the math in your head..thats for your platform and computer. By the time you do the math and scan other indicators for confirmation, you've missed a padded entry. Sure you usually get another pullback entry, which is probably more conservative; however, the quicker trader is already adding again here while holding a profit.
That is true but, my point is that PREM or $SPX or SPiN are not good enough if you are trying to "lean" on the ARBS. PREM is calculated by taking the difference between the $SPX (from the CBOE) and the Futures from the Merc. Here's the problem, $SPX is calculated by the CBOE every 15 seconds, so the PREM quote is only as fast as the components of its calculation. The problem stems from the source(cboe) not the data provider. I find it bizarre that so many traders seem to be trying to follow the PREM or the $SPX as a leading indicator or Arbitage Barometer. By the time the $SPX and PREM changes on the screen, the ARBS have already hit the Bid in the futures, lifted the offers in the cash and they are busy counting their profits! Help me out here. What am I missing? Anyone else have other opinions?
louise -- about five years ago the track data rep neal berry told me that the fast cash quote is compiled by track data and that, at that time, track data supplied the quotes to the cme floor. Additionally, your questions are very accurate. My answer contrary to Don's (I do not usually disagree with him about techniques) is you absolutely need charts. If you chart the cash and the futures and you are aware of what is going on in the leading stocks you can start to anticpate the next print of the prem. If you look at this long enough you realize that there are two types of programs. One you could look to fade for a scalp and the other type of program you stay out to the way of until its over (vulture talked about this) ---then you could look for a good pop. I believe one is the arb program and one is the basket dump or pump the market near a round number type program. So your statement is correct, there is a problem because of the cboe, but there are ways around the problem.
At our firm, we use the spread (in percentage) between theoretical price and actual price of stock index futures, computed in r/t, in an Excel worksheet linked via MSFT's DDE codes to live digital feeds (eSignal & RealTick). We use the LIBOR rate for risk free interest, in lieu of, the T-Bill rate. We do this for both ES/SP and NQ/ND. Then, we look to see if the spreads are constantly positive or contastly negative. This help us tremendously in our leveraged hi-bata trades & stock index futures. Fari
on the futures and the cash rising simultaneously: Is it not possible that front month spoo and cash are bought (cash to push up the futures), and the far months sold?