Do pro's trade SPY?

cunparis · Jun 30, 2009

Quote from Chuck Krug:

a lot of funds can only 'invest' in stocks not in options and futures

But wouldn't it be better to analyze the index rather than an ETF, even if one was going to invest in the ETF?

I trade ES and I analyze ES. I wonder if I should be anlayzing the index. After all ES is going to follow the index..

Chuck Krug · Jun 30, 2009

analyze both
+ oil

nitro · Jun 30, 2009

Quote from cunparis:

But why would a firm tie up a couple million dollars in SPY when they could just tie up 40k in ES?

This is the part that I don't get.

Most buy side is not allowed to hold futures for an extended period of time, per their prospectus.

Hook N. Sinker · Jun 30, 2009

Quote from cunparis:

I'm curious who trades SPY? Do professionals trade it?

http://nastybrutishandtall.com/2006_09_01_archive.html

"Amaranth Hedge Fund Equity Portfolio - A Quick Look

This spreadsheet was posted yesterday by stock guru Bill Cara and shows Amaranths equity portfolio as of 6/30/06. While this was not the section of the portfolio that Brian Hunter controlled an review of the buys and sells that took place in the past week show how bad the liquidity crunch at Amaranth had become.

First we took a look at the top ten holdings as % of the portfolio on 6/30:

SPY US - 127.23 <<<<<<<<<<<
GG US - 30.22
S US - 19.99
HUM US - 53.70
RAIL US - 55.51"

chrismontez · Jun 30, 2009

"I'm curious who trades SPY? Do professionals trade it? Smart money?"

I've seen some fairly large option trades on both the SPY and OEX that resulted in millions of dollars in profits. that would lead me to believe professionals do trade it.

samueldoernte · Jun 30, 2009

Quote from cunparis:

But wouldn't it be better to analyze the index rather than an ETF, even if one was going to invest in the ETF?

I trade ES and I analyze ES. I wonder if I should be anlayzing the index. After all ES is going to follow the index..

your understanding of market mechanics is flawed. One doesn't "follow" the other necessarily. ES trades at a premium or discount to the fair value of the index. In an efficient market they should trade exactly together at fair value. Right now ES should be trading at -4 approx. Above or below this is an arbitrage opportunity. That is why the markets move together.

cunparis · Jun 30, 2009

Quote from samueldoernte:

your understanding of market mechanics is flawed. One doesn't "follow" the other necessarily. ES trades at a premium or discount to the fair value of the index. In an efficient market they should trade exactly together at fair value. Right now ES should be trading at -4 approx. Above or below this is an arbitrage opportunity. That is why the markets move together.

I said ES follows the S&P index. I didn't say they are always at the same price. You're talking about something else.

samueldoernte · Jun 30, 2009

ES is the mini futures contract for the S&P500. It does not "follow" the cash market. It trades at a fair value to it.

RatioTrader · Jun 30, 2009

Generally when we want to trade the S&P we trade the ES futures, however we have played SPY with Options as well.

cunparis · Jun 30, 2009

Quote from samueldoernte:

ES is the mini futures contract for the S&P500. It does not "follow" the cash market. It trades at a fair value to it.

I think we're saying the same thing..

If the S&P 500 goes up the ES isn't going down, and the S&P 500 index doesn't follow ES so that leaves one choice and that's ES follows the S&P 500. OR they both move completely independently which we know isn't true either. SO i see no other option than for ES to follow the S&P.

If this is incorrect can you please elaborate and give an example?