This is not accurate, and I have no idea where the 5mm number came from. All the trading curbs mean is that they cannot buy or sell the stocks (or stock baskets) using computer generated orders. These same institutions continue to trade. Just not that particular strategy (ie: cash vs. futures). This techinique was one that was blamed for the crash in 1987. There is always a scapegoat. In 1929 it was short sellers. The blame is rediculous IMO. No one has to bid up the futures to a pt. of being out of whack. Or to sell them off hard enough to get to a discount. Program traders are not the bad guys. If you could buy a widget in NY for 4 dollars and simulatneously sell it in Chicago for 5, are you violating any business standards?
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prem, futures, program trading
- Thread starter nljones5
- Start date
OK, But how do we use the Prem as an indicator for trading; I believe that is the question NlJones5 is askin. Very simply, chart the Prem itself, using 1min bars and 1/3ma1 cross up/down . Determine the range and establish horizontal hi/lo boundaries of varing degrees: extreme to the mean. For example, on 7/12/02 throughout the last hr. extremes=+2.0 to -1.0 , bulk range: +1.5 to -.50,-.75 and the mean: +.5.
At around 2:52, the downside move began to sharply reverse on covering over 912 handle, to 18.75 in 5min. A Retracement and bottoming process over the 914 handle is a higher low and one anticipates a continuation of an uptrend. In an established uptrend its conservative and relatively safe to buy a pullback, when the Prem is -1.0 to -.75 swing it with 3/5/13min charts or scalp it with the 1min. when the Prem hits +1.5. Rentry on the scalp is a buy when the Prem compresses to -1.0 to -.75, anticipating a resumption of the uptrend; always mindful of the charts and what extension you're in from the primary advance. Shorting/fading an uptrend when the Prem is +2.0 is an aggressive trade and best made after and exhaustive W3 up, 1.62-2.62Ext. anticipating profit taking and W4 retracement.
A conservative short is selling when Prem is +2.0 to +1.5 in an established downtrend, swingin with 3/5min charts or scalping with the 1min, covering when the Prem hits -.75 to -1.0; always mindful of locking profits before potential reversals/pivots at key retracement levels.
In consolidations, like 2-4point PingPong, once you have established the range same proceedure applies, buy/cover off the bottom -1.0 to -.75, sell/short at the top +2.0 to +1.5. But beware of breakdowns, breakouts and fakeouts from the range.
The Prem range changes day to day so know the daily range, estalish that first. Trend reversals happen at extreme Prems, so be mindfull of the reversal. And of course you're watchin all the indices, the tick for programs, trin for sentiment. And those gaps on the open are an easy trade to fade, up or down, they usually get filled.. Prem returns to the mean, UNLESS! there is something really "MEAN."--Peterg
At around 2:52, the downside move began to sharply reverse on covering over 912 handle, to 18.75 in 5min. A Retracement and bottoming process over the 914 handle is a higher low and one anticipates a continuation of an uptrend. In an established uptrend its conservative and relatively safe to buy a pullback, when the Prem is -1.0 to -.75 swing it with 3/5/13min charts or scalp it with the 1min. when the Prem hits +1.5. Rentry on the scalp is a buy when the Prem compresses to -1.0 to -.75, anticipating a resumption of the uptrend; always mindful of the charts and what extension you're in from the primary advance. Shorting/fading an uptrend when the Prem is +2.0 is an aggressive trade and best made after and exhaustive W3 up, 1.62-2.62Ext. anticipating profit taking and W4 retracement.
A conservative short is selling when Prem is +2.0 to +1.5 in an established downtrend, swingin with 3/5min charts or scalping with the 1min, covering when the Prem hits -.75 to -1.0; always mindful of locking profits before potential reversals/pivots at key retracement levels.
In consolidations, like 2-4point PingPong, once you have established the range same proceedure applies, buy/cover off the bottom -1.0 to -.75, sell/short at the top +2.0 to +1.5. But beware of breakdowns, breakouts and fakeouts from the range.
The Prem range changes day to day so know the daily range, estalish that first. Trend reversals happen at extreme Prems, so be mindfull of the reversal. And of course you're watchin all the indices, the tick for programs, trin for sentiment. And those gaps on the open are an easy trade to fade, up or down, they usually get filled.. Prem returns to the mean, UNLESS! there is something really "MEAN."--Peterg
Hi Gotrader. I read your posts regarding using prem to enter/exit scalps and am a bit confused and need confirmation. When you say that it is a conservative buy when prem compresses to -1 to -.75 do you mean buy the future for a scalp?
If you mean buy the stock then I am really confused. Prem is defined as futures over cash right? So if SPX is at 906 and sept future is at 905 which is -$1 premium and fair value is $1 then fair value of spx should be 904 which could be ripe for a program selling environment since the arbs would buy future/sell cash (i.e. stocks that comprise the 500). ?
By the ways has anyone here taken the HL camp course in Palm Beach covering program trading-pretty steep at 1450 for course 1 and $1650 for course 2. Was it worth it? Did you make enough $ on strategy to pay for course?
Thanks in advance.
If you mean buy the stock then I am really confused. Prem is defined as futures over cash right? So if SPX is at 906 and sept future is at 905 which is -$1 premium and fair value is $1 then fair value of spx should be 904 which could be ripe for a program selling environment since the arbs would buy future/sell cash (i.e. stocks that comprise the 500). ?
By the ways has anyone here taken the HL camp course in Palm Beach covering program trading-pretty steep at 1450 for course 1 and $1650 for course 2. Was it worth it? Did you make enough $ on strategy to pay for course?
Thanks in advance.
GATrader,
Good question about the HL Camp course. I have long wondered if it was any good. Strange that no one here has ever mentioned attending it. My personal observation is that program trading became less of an influence during the great bull market. In the early to mid '90's it was a big factor, then seemed to fade into the background during the bull market. Recently, it has become the dominant factor in the futures, so much so that Jim Cramer has even started commenting on that fact.
Good question about the HL Camp course. I have long wondered if it was any good. Strange that no one here has ever mentioned attending it. My personal observation is that program trading became less of an influence during the great bull market. In the early to mid '90's it was a big factor, then seemed to fade into the background during the bull market. Recently, it has become the dominant factor in the futures, so much so that Jim Cramer has even started commenting on that fact.
GoTrader, what I understand about what you said sounds good to me, but I don't know a lot of the jargon you use: 912 handle, exhaustive W3 up, W4 retracement, PingPong, etc. I hope you post some more comments about trading with the PREM.
Today on CNBC I think they said about 45% of current NYSE volume is program trading, but I don't know if I could absorb 3k worth of info in two days, and I wonder what size acccount you would have to be trading to utilize Camp seminar. It may be for people who trade other people's money. I hope somebody comments on it.
Today on CNBC I think they said about 45% of current NYSE volume is program trading, but I don't know if I could absorb 3k worth of info in two days, and I wonder what size acccount you would have to be trading to utilize Camp seminar. It may be for people who trade other people's money. I hope somebody comments on it.
GAtrader here we are trading the S&P emini, using the prem as an idicator as it oscillates back and forth from overbought and oversold conditions, once we have established a consistant range. Basically, in an established uptrend, buyin the emini when the Prem is in its low range and breaking up; conversely, in a downtrend selling the emini when the Prem is in maxed out and turnin down. Mindful that the trend may be reversing and this is often indicated by an extreme Prem, i.e. oustide of the consistant range. Chart the Prem, chart the emini...and compare the two, should be apparent that the Prem signals are valid for Emini moves.--PeterG.
Gotrader-
Thanks for the best explanation I've heard.
One question for you (or anyone else)-
I can't seem to get PREM from my quote provider (if anyone knows how to get it in Nextrend let me know). I'm going to try using the ES mini contract minus the SPX (ESP2'CM-SPX.X) to give similar signals. I don't necessarily care if the values are the exact same, just that the oscillations and relative extremes are at the same time as the PREM quotes. Any reason this wouldn't work? I just charted it and it gives a nice -.5 to +1 range with some extremes of -1.5 to about 1.75. I'll watch it tomorrow in real time.
Thanks-
JPB
Thanks for the best explanation I've heard.
One question for you (or anyone else)-
I can't seem to get PREM from my quote provider (if anyone knows how to get it in Nextrend let me know). I'm going to try using the ES mini contract minus the SPX (ESP2'CM-SPX.X) to give similar signals. I don't necessarily care if the values are the exact same, just that the oscillations and relative extremes are at the same time as the PREM quotes. Any reason this wouldn't work? I just charted it and it gives a nice -.5 to +1 range with some extremes of -1.5 to about 1.75. I'll watch it tomorrow in real time.
Thanks-
JPB
NlJones, the 912 handle is just pit trader speak for the emini trading around 912, an handle is one point. A 4 handle move would be to 916. W3 & W4 refer to Elliot wave counting principals; W3s tend to be the best moves usually 162% to 262% of the primary move W1 and are corrected by W4s. So at the end of W3, if you see an extreme Prem, you take profits, b/c the trend gets corrected and you reverse if aggressive.--PeterG