who brings futures and cash stock prices together?

Discussion in 'Trading' started by z32000, May 8, 2007.

  1. z32000

    z32000

    does the "electronic system" automatically bring cash & futures prices together if there is a wide point difference?

    I know that cash-futures arbitragers (hedgers and speculators) do this most of the time, but what happened if they didn't? Would the "electronic system" kick in and force an arbitrage between them?
     
  2. Which "electronic system" are you talking about?

    The premise that no-one would step in to take a "risk-free" arbitrage doesn't make sense.

    I think adequate links have been provided for you on this matter in your other two threads.
     
  3. 2006

    2006

    The boogey man.
     
  4. z32000

    z32000


    Say that you're trading ES. You get nothing delivered to you when the contract expires. Basically, if SPX moved one way and ES moved another way, I don't see what would motivate investors to bring them together...I guess if you anticipate other investors will bring them together, then by jumping in first to narrow the gap would make a profit...
    But what if everyone just let them go there seperate ways?

    Does the "system" kick in to force an arbitrage?
     
  5. What do you mean nothing is delivered?

    It's cash settled BASED ON THE UNDERLYING. That itself is enough to force it into fair value territory.
     
  6. Look up the definition of arbitrage first, then get back to me.
     
  7. Banjo

    Banjo

  8. Top o' the market to ya!