ES Journal Archive (2009 - 2010)

[Lawrence Chan]

Quote from rock34748:

LC & others...
If ES goes above 855/60 and closes in that area, does that have any significance with options exp? I get that based on technicals more downside is expected if we don't close above 55/60 (depending on trader's indicators.) But with opt exp if we close at or near 45/50 range why do you expect heavy downside? Is it as simple as it seems (no strength, intentionally floating market simply because of opt exp.)? I'm am reading up on opt exp days and charts, but wondered your points...Thx

No insight or whatever on the close.

Why - I no longer position trade ES due to the shocking nature of the news events and the widened range, thus I do not spend time on weekly projections at all.

 

[Pekelo]

Quote from Lawrence Chan:

Pek, it is money on the line man!

Money, schmoney...

By the way, yesterday we bottomed with the dragon pattern, height was 7 pts:

Also note how nicely the SMA 9 keeps one long between 1 and 3 pm...

 

[volente_00]

Those lions never seem to amaze me with the derivative games.

 

[saliva]

Quote from opt789:

Are you serious?
In case you are, or others may not be aware, there is a relatively simple arbitrage relationship between ES and the cash SPX. It is a function of just interest rates and dividends. The simple way to look at it is that you could buy all the stocks in the SPX in the correct numbers to mimic the index but that would cost you the interest you would earn by not investing, and on the plus side you would receive dividends. As apposed to the ES which has a much smaller cash requirement but you don’t get the dividends. Therefore the fair value of ES to SPX is interest minus dividends which is all explained here http://www.indexarb.com/fairValueDecomposition.html

With interest rates so low the dividends outweigh them and we are in a period of negative fair value. These calculations are just simple mathematics, there is no information gained bullish or bearish from these numbers.

I only know how to read charts. Everything else is greek to me.

But if what you say is true, then why was ES trading at hefty premium (and it was pretty damn wide) when the general market was tanking in October?

 

[Pekelo]

Tomorrow I am going to meet someone, who could stop this rally. He always lies about fishing though...

 

[rock34748]

Quote from Lawrence Chan:

No insight or whatever on the close.

Why - I no longer position trade ES due to the shocking nature of the news events and the widened range, thus I do not spend time on weekly projections at all.

OK thanks. I see the close as very clearly indicating we go up or down or sideways next week. (admit bias short term bull.) But gotta see how she goes. Agree, news could affect.

 

[opt789]

Quote from saliva:

I only know how to read charts. Everything else is greek to me.

But if what you say is true, then why was ES trading at hefty premium (and it was pretty damn wide) when the general market was tanking in October?

As I said it has to do with interest rates. Rates were much higher in October, and the higher the interest rates are the higher the premium is to fair value.

My basic point is that you don’t have to worry about it. I know daytraders like to keep things simple so the current fair value can be seen on the site I posted if you are interested but you don’t have to think about the actual level because it shouldn’t affect your trading. Some try to use the current spread between the ES and SPX to gauge one thing or another but that is usually superfluous to your trading.

Since you mentioned greeks, option traders need to be very well aware of them, but the most import thing about them (which is that they are, at best, guesstimates) is something lost on many new traders. Just another example of trying to read too much into something. As a daytrader in the ES you have two choices, go long or go short, then you cover – there is nothing else to it. So being a good chart reader is your grail, you don’t need all the extraneous things crazy swing/option traders like me use.

 

[trackstar]

Quote from Pekelo:

Hope is a four letter word.

MACD works just fine (as the sample showed) in trending markets. The problem is that we don't know when it is going to trend...

buddy everything works in trending markets....that's my point.

 

[kinggyppo]

Quote from opt789:

As I said it has to do with interest rates. Rates were much higher in October, and the higher the interest rates are the higher the premium is to fair value.

My basic point is that you don’t have to worry about it. I know daytraders like to keep things simple so the current fair value can be seen on the site I posted if you are interested but you don’t have to think about the actual level because it shouldn’t affect your trading. Some try to use the current spread between the ES and SPX to gauge one thing or another but that is usually superfluous to your trading.

Since you mentioned greeks, option traders need to be very well aware of them, but the most import thing about them (which is that they are, at best, guesstimates) is something lost on many new traders. Just another example of trying to read too much into something. As a daytrader in the ES you have two choices, go long or go short, then you cover – there is nothing else to it. So being a good chart reader is your grail, you don’t need all the extraneous things crazy swing/option traders like me use.

This has been discussed rather poorly in other threads and is somewhat confusing. The es mini contract is 1/5 of spx which is pit traded by locals and in size by institutions. Lets assume that es mini, spx, and spy expire monday and there is no interest or dividends to contend with, how would a trader allocate $100,000
long in a portfolio? In other words how are they equivalent on a dollar or tick basis?

 

[saliva]

Quote from opt789:

As a daytrader in the ES you have two choices, go long or go short, then you cover – there is nothing else to it.

Well, you still need to know when to get in and when to get out but very well stated. Ya can't get any more simpler than that!