lunch time thoughts on the ES

F

fearless9

Here is something to ponder on over lunch.
It concerns the ES on any typical day.

Today for example, it opened down then spent the first half of the morning climbing and the second half drifting around.

As it was climbing this morning making new daily highs you could see from time to time large strikes thumping the bid.

I have always assumed they are exits since I can see no reason for them to be short entries.

On the other hand I may be missing something blindingly obvious and that is where your collective wisdom and opinions come in.

regards
f9
 
Quote from fearless9:

Here is something to ponder on over lunch.
It concerns the ES on any typical day.

Today for example, it opened down then spent the first half of the morning climbing and the second half drifting around.

As it was climbing this morning making new daily highs you could see from time to time large strikes thumping the bid.

I have always assumed they are exits since I can see no reason for them to be short entries.

On the other hand I may be missing something blindingly obvious and that is where your collective wisdom and opinions come in.

regards
f9
More...

Often SPX mm's from the CBOE. They account for at least 10% of ES's volume and their activity is distinguishable from the program trades.
 
Quote from Pa(b)st Prime:

Often SPX mm's from the CBOE. They account for at least 10% of ES's volume and their activity is distinguishable from the program trades.
More...

Thanks PP. Do you mind expanding on this.

regards
f9
 
Quote from fearless9:

Thanks PP. Do you mind expanding on this.

regards
f9
More...

In a quickly rising ES market programs will adjust offers just above fair value and then if lifted buy New York. No need for them to hit bids unless stocks are going sellers. When that happens there's follow thru.

SPX traders on the other hand are trading against options flow. Here's an example. Let's say on a futures up tick to 1516.00 bid a CBOE broker receives an order to buy a put spread. While most of the crowd might only be willing to sell puts against 1516.25's a mm who is stuck long gamma might think "here's an order that'll help me get flatter, I'm willing to do these against the ES bid." IOW's the mm's thirst for gamma reduction might trump price considerations. Just the same he still needs to sell deltas so he hits the ES bid. Or an offer may come in that the entire SPX pit finds attractive against futs.

When I was in the Bond pit the best orders to trade against were hedges from the options guys. It didn't mean options traders were stupid or even a fade. It's just that their flow was predicated differently from the primary dealer who was trying to pick you off on the cash turn.
 
Quote from Pa(b)st Prime:

In a quickly rising ES market programs will adjust offers just above fair value and then if lifted buy New York. No need for them to hit bids unless stocks are going sellers. When that happens there's follow thru.

SPX traders on the other hand are trading against options flow. Here's an example. Let's say on a futures up tick to 1516.00 bid a CBOE broker receives an order to buy a put spread. While most of the crowd might only be willing to sell puts against 1516.25's a mm who is stuck long gamma might think "here's an order that'll help me get flatter, I'm willing to do these against the ES bid." IOW's the mm's thirst for gamma reduction might trump price considerations. Just the same he still needs to sell deltas so he hits the ES bid. Or an offer may come in that the entire SPX pit finds attractive against futs.

When I was in the Bond pit the best orders to trade against were hedges from the options guys. It didn't mean options traders were stupid or even a fade. It's just that their flow was predicated differently from the primary dealer who was trying to pick you off on the cash turn.
More...

Many thanks PP.
You mentioned earlier "their activity is distinguishable from the program trades"

In what text did you mean this?

regards
f9
 
Quote from Pa(b)st Prime:

In a quickly rising ES market programs will adjust offers just above fair value and then if lifted buy New York. No need for them to hit bids unless stocks are going sellers. When that happens there's follow thru.

SPX traders on the other hand are trading against options flow. Here's an example. Let's say on a futures up tick to 1516.00 bid a CBOE broker receives an order to buy a put spread. While most of the crowd might only be willing to sell puts against 1516.25's a mm who is stuck long gamma might think "here's an order that'll help me get flatter, I'm willing to do these against the ES bid." IOW's the mm's thirst for gamma reduction might trump price considerations. Just the same he still needs to sell deltas so he hits the ES bid. Or an offer may come in that the entire SPX pit finds attractive against futs.

When I was in the Bond pit the best orders to trade against were hedges from the options guys. It didn't mean options traders were stupid or even a fade. It's just that their flow was predicated differently from the primary dealer who was trying to pick you off on the cash turn.
More...

Pa(b)st,

Fascinating stuff... I too noticed what 9 did that there was some heavy selling this morning... I thought it was because we are up here on ES & NQ futures volume fumes... vapors... whispers of liquidity..

We are in the 20% or less volume range for volume traded today - Sometimes down to 10%, during most 15 minute bars today as well as the Hourly comparison and the 2 hour comparison, etc... versus the last 20 days... ... and for a Monday, even pre-fed doldrums that is pretty low...

So i thought/think the 'Big Boys' were/are scaling out to leave the rest of the corral as bag holders for a gap down opening tomorrow if this puppy closes on its highs...


<img src="http://www.enflow.com/p.gif">
 

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Quote from EdgeHunter:

So i thought/think the 'Big Boys' were/are scaling out to leave the rest of the corral as bag holders for a gap down opening tomorrow if this puppy closes on its highs...
<img src="http://www.enflow.com/p.gif">
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Yes, as I mentioned, I too always imagined the big boys were exiting.

However, assumption being the mother of all FUs, I just wanted to check around for alternative views, which PP is kindly offering.

regards
f9
 
Thank you. Well it could be that there's some long liquidation up here. After a frickin' 114pts in less than two weeks I'd hope so. Rather than speculation on players per 'se I was merely answering the OP as to what else could be on the ES tape other than the hackneyed talking head "profit taking" response.
Quote from EdgeHunter:

Pa(b)st,

Fascinating stuff... I too noticed what 9 did that there was some heavy selling this morning... I thought it was because we are up here on ES & NQ futures volume fumes... vapors... whispers of liquidity..

We are in the 20% or less volume range for volume traded today - Sometimes down to 10%, during most 15 minute bars today as well as the Hourly comparison and the 2 hour comparison, etc... versus the last 20 days... ... and for a Monday, even pre-fed doldrums that is pretty low...

So i thought/think the 'Big Boys' were/are scaling out to leave the rest of the corral as bag holders for a gap down opening tomorrow if this puppy closes on its highs...


<img src="http://www.enflow.com/p.gif">
More...
 
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