Does Spreads, Forward curves or Options give intraday clues ? (ES)
- Thread starter Sekiyo
- Start date
Everything must be made as simple as possible, but not one bit simpler
Excellent question, and I have often wondered this as well.
I think part of the problem is that we never know why someone is buying or selling ES. Hedging is certainly a completely legitimate reason to either buy or short a contract but you are in fact hoping it goes against you so that your initial position in something else is the winner. And although this is more than likely a very small percentage of the volume, I think with ES options, this is even more true. When you get into spreads, analysis of all those different strikes and dates I think ends up being pretty much a toss up.
Some traders claim that bonds or crude can lead ES (bonds in the opposite direction). I don't know if there is any data to back that up though.
Jigsaw trading has a video (which I believe is free) that puts the DOMs of ES/NQ/RTY side by side to garner clues to the very short term direction. Jigsaw's thesis is that if all three are moving, then the move has more power. If only one moves and the others either don't move or go the other way, then the very near future is range-bound. I don't trade using DOMs or Jigsaw's version, so I don't know if this works either.
Jigsaw trading has a video (which I believe is free) that puts the DOMs of ES/NQ/RTY side by side to garner clues to the very short term direction. Jigsaw's thesis is that if all three are moving, then the move has more power. If only one moves and the others either don't move or go the other way, then the very near future is range-bound. I don't trade using DOMs or Jigsaw's version, so I don't know if this works either.
Not calendar spreads. But, intermarket index spreads. Calendar spreads on index futures are sensitive to interest rates. But, bond spreads also move the index because of no arbitrage pricing. The pricing model involves a floating rate. (risk free rate)
The pro's will trade the intraday performance using hedge ratios. They're getting exposure to the actual % change in value of the stocks comprising the indexes.
(long/short trading in the front month contracts)
It's a constant battle for liquidity, since there are so many shops using the index as a hedge in one way or another.
YM/ES is heavily traded, as is NQ/ES due to overlap in the constituents.
On Friday, the YM/ES spread had a massive rally right at the open. The move was huge because the dow had sold off >1800 points the day before.
It was short covering. Just think about it. When the NYSE opening bell starts ringing, and all the orders hit the cash market, each index is gonna jump relative to the others. It's not really possible for every index to move in a completely controlled way.
Futures pro's are trading the divergence using VWAP and technicals. There are also ways to lever index spreads using structured products. (return swaps)
The pro's will trade the intraday performance using hedge ratios. They're getting exposure to the actual % change in value of the stocks comprising the indexes.
(long/short trading in the front month contracts)
It's a constant battle for liquidity, since there are so many shops using the index as a hedge in one way or another.
YM/ES is heavily traded, as is NQ/ES due to overlap in the constituents.
On Friday, the YM/ES spread had a massive rally right at the open. The move was huge because the dow had sold off >1800 points the day before.
It was short covering. Just think about it. When the NYSE opening bell starts ringing, and all the orders hit the cash market, each index is gonna jump relative to the others. It's not really possible for every index to move in a completely controlled way.
Futures pro's are trading the divergence using VWAP and technicals. There are also ways to lever index spreads using structured products. (return swaps)
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Yes I’ve heard about inter market correlation.
It’s said the more volume, the more efficient,
So I don’t watch NQ nor less liquid markets.
It’s true ZN has kind of an inverse correlation,
But it’s a weaker correlation than btw NQ & ES.
Alright.
Thank you very much for your inputs.
I’ll have a look at front month inter market spreads then.