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Discussion in 'Index Futures' started by esc_trader, Dec 22, 2002.

1. ### H2O

Why are you calculating the spread as :

(ES *9.5) - Dow

(I think you just divide the DOW value by the ES value)

Have you ever thought of using volatility and point value into the calculation ?

#11     Dec 24, 2002

I do it this way because I have a program that calculates DJIA "fair value" using the S&P as a guide, and it's just easier for me to decipher this way, but certainly pairs are often tracked in the manner you suggest.

I use 9.5 for the S&P simply because that is YM divided by ES at this time.

How do you put those other factors into the equation?

#12     Dec 24, 2002
3. ### H2O

Point Value is very easy.

ES * 50 = ES value (900 * 50 = 45000)
YM * 5 = YM value (8450 * 5 = 42250)

You now now the value of each product. According to this you should buy 1 and sell 1. (They are approx equal)
If you look at the average daily range (volatility) you can also calculate an "ideal" spread

I use special software which calculates the ideal spread. Unforuntely this can only be done on EOD but during the day nothing will happen that changes the spread dramaticly.

#13     Dec 24, 2002
4. ### SethArb

sometimes with success ... but I prefer to do it outside

of 930 am - 4 pm when it is easier for me to see

if things are out of line

#14     Dec 24, 2002
5. ### john eley

I found watching the spreads interday helps to get the feel for how they move.www.livecharts com has delayed charts available .
(es03h*50) - (ym03h*5) is the symbol you need too use.or your own formula.be sure too have a space between each part pf the formula ie (space es03h space * space 5 space) ect.hope this helps

#15     Dec 24, 2002

Looking to BUY (Cover) 2 at 19-23

#16     Dec 26, 2002

Ready to SELL at 32-34.

#17     Dec 26, 2002

#18     Dec 26, 2002