I've gone to the yahoo.com finance page (from the main page, click on the
markets link). If you go there, you'll see that you can get a graph of
the nasdaq, dow, and s&p indices (they seem to show the nasdaq and dow by
default, so I mouse over s&p to see that one). What I see is some correlation
between the markets; in fact the dow & s&p are highly correlated, except when
they're not. I noticed that, for example, the dow may be down 1.2% and the s&p
down 1.4% at some point in time. At another point in time it may be 1.3% vs.
1.25%, and at another point in time they may be both down 1.35%. I am not
concerned with why there is a correlation between the dow and s&p, just
concerned with how to make money when they're not perfectly correlated.
So, I think that if I could sell one futures contract and buy another,
say, sell the dow and buy the s&p when there is a 0.2% difference in
their relative values (down or up from the previous days close), then wait
until there is just a 0.1% difference in their relative values, I'd
make 0.1% on the contracts (liquidating both when there is a 0.1% difference).
0.1% is about $60, given the current value of the YM and ES contracts.
It seems to be a low-risk/small-gain trade.
Yeah, yeah, I know, $60 isn't much.
But I prefer to get rich slowly.
Plus, once legged-in to this thing the perf. bond is way low,
so it may be possible to do more than one at a time.
What could go wrong with this strategy? I know that this "spread" might go
against me, or that the "spread" might not close before the end of the day.
Any comments?
Mods: I will only do a "journal" about this if there is interest, so feel free to move this thread to another area.
markets link). If you go there, you'll see that you can get a graph of
the nasdaq, dow, and s&p indices (they seem to show the nasdaq and dow by
default, so I mouse over s&p to see that one). What I see is some correlation
between the markets; in fact the dow & s&p are highly correlated, except when
they're not. I noticed that, for example, the dow may be down 1.2% and the s&p
down 1.4% at some point in time. At another point in time it may be 1.3% vs.
1.25%, and at another point in time they may be both down 1.35%. I am not
concerned with why there is a correlation between the dow and s&p, just
concerned with how to make money when they're not perfectly correlated.
So, I think that if I could sell one futures contract and buy another,
say, sell the dow and buy the s&p when there is a 0.2% difference in
their relative values (down or up from the previous days close), then wait
until there is just a 0.1% difference in their relative values, I'd
make 0.1% on the contracts (liquidating both when there is a 0.1% difference).
0.1% is about $60, given the current value of the YM and ES contracts.
It seems to be a low-risk/small-gain trade.
Yeah, yeah, I know, $60 isn't much.
But I prefer to get rich slowly.
Plus, once legged-in to this thing the perf. bond is way low,
so it may be possible to do more than one at a time.
What could go wrong with this strategy? I know that this "spread" might go
against me, or that the "spread" might not close before the end of the day.
Any comments?
Mods: I will only do a "journal" about this if there is interest, so feel free to move this thread to another area.
