Using S+P premium levels in emini trading ?

Discussion in 'Trading' started by aspenboy, Mar 23, 2007.

  1. Would someone mind educating me as to any strategies re the prem levels or(range) as a possible help ? I have found prem and discount to fair value to be of little help.
    Anybody successfully utilizing this as a stand alone or in combo w/other tools possibly-trin,vix,etc ? Thx.
  2. Our traders use it this way. Since the e's are a leading indicator, when we see a high premium, we feel comfortable buying the "lagging" stocks, hopefully before the program traders who are selling PREM e's, and buying baskets of stock, thus bringing PREM back to parity or below....reverse on the downside. Rather than guessing market direction, we can capitalize on quick responses to Fair Value disparities.

    PREM/DISC is just one of many indicators used to determine proper entry/exit levels.

  3. Thx. but interest is in ES trading.
  4. There are some really helpful applications of the prem.

    As you know the prem is set daily before open and it is not adjusted until the next day.

    If you trade intraday you will heve to adjust it around settlement time. On some days you will have to make adjustments more frequently.

    For ES trading, it is better to use the NYSE DJ premium considerations.

    If you are interested in the full blown story let me know, if not it's cool.
  5. Yes..full blown story would be great ! Thx. Jack.
  6. basis


    Huh? It's not "set" at all. It's a function of the carrying costs of the stocks to the expiration date of the future, which is interest on borrowings to purchase the basket, netted against the dividends you receive. It can definitely change intraday.
  7. In commodities trading the offset or prem of the $INDU and the DJXX and /or the YMXX is set pre open. You can review this at

    I am speaking about the relationship of the quarterly futures commodities indexes.

    I onlt responded to aspen as a consequence of his interest in the ES and the connection of the ES to prems.

    I do not know why what I spoke of is determined just once a day and not updated continually at

    I mentioned that a manual or coded update is a good idea during the day. That means that updating it when it has gotten out of line is a good idea when you are using it as an intraday signal generator.

    For you it is not set but for me it is seet and published before the market open daily. Because of this I use it to make money.
  8. see Attached
  9. fair value and premium are the story
    sorry do not have ms word
  10. ramora


    Using the premium.
    Written and Posted by Jack Hershey


    Advanced intermediate traders need signals to forewarn them to go to verniers for affecting trades and partial fills when necessary. Known interrelationships of market degrees of freedom are available for this. Coding degrees of freedom is possible and converting the data to signals, visually or for mechanical systems, is the natural outcome.

    The indicator associated with the premium deals with several common trading failures and/or mistakes: early exits, having to scale to minimize risk and missing optimum exits. It also performs and an enhancement for extracting the full movement of trend segments during the day.

    Connecting the Dots

    The principle premium relationship is that between the $INDU and the DJXX/YMXX. It is set daily, pre-open and is available at The cash is lead by the futures commodity index. The signal initiation is 15 to 45 seconds before a move. This allows the trader to have a resource that can be used in intraday trading as a leading indicator of appropriate trading instruments. The most practical connection turns out to be ESXX. During times of end effects, the YM leads the ES.

    Building the indicator

    The difference of the cash ($INDU) and index (YMXX) is coded. This difference is then subtracted from the premium. The result is a neutral centered value where if the offset is known, the shift from neutral can be used as a leading indicator of the traded instrument. We define the two sides of neutral to define when a new trend is beginning. The arrangement is to have a “squeeze” be values below neutral and have them indicate a “short” trend is beginning. A stretch indicates a “long” is beginning.

    The visual display of the squeeze/stretch is done to create a box that streams using the most frequently segmented data available. Rays are placed on either side of the neutral as a visual “noise” reference; 2 units away from neutral is the standard. Likewise, two levels that indicate strength of signal (decision-wise) are added 5 or 6 units away on either side of neutral.

    Using the indicator

    The indicator signals are collected as a part of the data set collection process. For matters of clarity, it is best to introduce its use independently. From this, it will be seen that the signal can be used as a gating tool in mechanical applications.

    As time passes, the display continues and, without signal, the successive bars remain within the +/- 2 units noise channel centered on neutral. This appears as a band of data.

    The signal begins as the bars move to on side or another of neutral and their volatility grows as well. A vector results: having magnitude and direction. The leading nature of this allows the trader to move to a vernier type analysis connected to optimizing turns. The persistence of the signal is up to minutes in nature. Once a trend is under way the leading aspect of the dynamic change is lost and the display returns to a non signal status. There is no way a person sweeping a display can miss the signal period once he is attuned to the indicator. It is powerful.

    As a trend is initiated, and continues, several stages of signals result during the trending. They are in the nature of thinness and surges. Neither sends a signal that is a cause for action. In fact, the signals will be reinforcing the initiator of the trend. Three price internal patterns are of interest: stalls, hitches and dips.

    All of the above makes it possible to trade all in, to hold instead of exit early, and to reverse at the end of a trending segment in an optimal way.

    The reversing signal is clear as a signal in the opposite direction of the hold signal.

    Fro expert trading, it is possible to use the stretch/squeeze in conjunction with the other most sensitive signal generators an expert uses.
    #10     Mar 23, 2007