Using Fair Value PREMs to trade the ES

Discussion in 'Index Futures' started by commanderco, Sep 28, 2006.

  1. I know that this subject has been discussed on ET, but I see little evidence that traders use PREMS on the ES unless you assume that every comment is attached to a User.

    Being basically a simple man, I just wait at the Time & Sales gate and watch what comes through, but if there is a case for PREMs then I would consider it.

    Just interested in User comments.
  2. Thanyou mmt, I am aware of that site and others.
    I am interested in User`s comments.
  3. We teach our traders to keep a PREM/DISC (to FV) window at all times. Simple reasoning goes back to basics of how futures traders on the CME trade.

    When Futures trade at a PREM, and the are selling (of course), when they don't get immediate reversal, they make a couple of hand signals (or mouseclicks) and theoretically buy all 500 stocks (underlying baskets, etc.). Opposite on the DISC side, of course.

    This gives our equities traders a few second edge (especially when combined with the live squawk box from the CME floor) to anticipate intraday moves.

    My brother says "can't trade without it". (as do I).


  4. Thanks Don.
    The tools that I use are filtered T & S and accumulated bid/ask traded volume plus total volume.
    And so within the world of the ES nothing moves without coming through my gate.
    That then leaves the possibility that the cash market could be the driver but then I am relying on the big strikes to know this and act in accordance.
    And so now my blind spot is the lag that it takes the big strikes to pop up on my radar.
    Do you think that it is worth my while covering this prospect?
  5. The futures control the market...more money changes hands on the CME than the entire the PREM will give you triggers before you see any TS. IMO.

  6. Many thanks Don.
    I gather you think that involving myself in the PREM will be worth the time.
  7. What's DISC??? Are you referring to the underlying INDEX value?
  8. premium / discount to fair value of the underlying index
  9. Good job Chiguy!! LOL.

    Yes, simple thing to imagine buying x at a discount while simultaneously selling x at retail price and vice versa. Futures vs. Underlying stocks. has some good stuff.

    #10     Sep 28, 2006