I like to use the S&P cash (symbol $SPX) to trade the S&P futures (symbol ES #F) because of the clarity of the cash. I am aware of the price differences between the cash and the futures due, in part, to the premium. I also am aware that very large traders can move the price levels of both the cash and the futures through buy/sell programs. My question is whether it is a mistake to think of the cash as the dog and the futures as the tail? A second question is whether anyone can direct me to any articles on using the cash to trade the futures?
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Using cash to trade futures
- Thread starter accutrader
- Start date
Quote from accutrader:
I like to use the S&P cash (symbol $SPX) to trade the S&P futures (symbol ES #F) because of the clarity of the cash. I am aware of the price differences between the cash and the futures due, in part, to the premium. I also am aware that very large traders can move the price levels of both the cash and the futures through buy/sell programs. My question is whether it is a mistake to think of the cash as the dog and the futures as the tail? A second question is whether anyone can direct me to any articles on using the cash to trade the futures?
The futures are the leading indicator. When the big futures traders and institutions are able to sell with a premium they buy either a basket of equities, or all 500 stocks, and vice versa when they close positions. This is one of the primary reasons we prefer to trade equities, the lagging stocks are so much easier to trade.
FWIW,
Don
Also, you do understand that the cash you are looking at is not real-time. I forget the actual figures, but it only updates in specific time intervals, like once ever 10 secs or something.
If you want actual tick for tick cash value of the s&p, dow, or whatever, you need to get a Bloomberg terminal and look at the fast cash or make your own index with a spreadsheet, but there will be major lag for 500 symbols on excel.
If you want actual tick for tick cash value of the s&p, dow, or whatever, you need to get a Bloomberg terminal and look at the fast cash or make your own index with a spreadsheet, but there will be major lag for 500 symbols on excel.
eSignal updates every 15 seconds which should be fast enough. However, it seems to me that the futures generally lead the cash. Intutively, it seems it should be the cash that leads.
I think the cash data originates with the S&P corporation. I think I will contact them.
Thanks
I think the cash data originates with the S&P corporation. I think I will contact them.
Thanks
I have actually watched the realtime cash from Bloomberg along side the futures. I think it only seems that the futures lead because you are watching a non real time feed. During the time that I watched the 2 together, a period of about 2 weeks, they were pretty much in lock step with each other. I'm guessing from computerized arbs. One did not lead the other on a consistent basis, they took turns leading on violent moves, and most of the time they just moved together.
Quote from SDticks:
I have actually watched the realtime cash from Bloomberg along side the futures. I think it only seems that the futures lead because you are watching a non real time feed. During the time that I watched the 2 together, a period of about 2 weeks, they were pretty much in lock step with each other. I'm guessing from computerized arbs. One did not lead the other on a consistent basis, they took turns leading on violent moves, and most of the time they just moved together.
I have to respectfully disagree. We have traded futures since 1983, and know many of the institutional CME traders. The futures "are the market" and lead. Once in a blue moon, on relatively flat days you may see the SPX lead. The market mechanics involved, from brokers and institutions dictate that futures lead.
You need to have a live "Prem and Disc" to Fair Value running real time to see what I'm talking about.
All the best,
Don
I do agree about the inconstency of data feeds.
Quote from Don Bright:
I have to respectfully disagree. We have traded futures since 1983, and know many of the institutional CME traders. The futures "are the market" and lead. Once in a blue moon, on relatively flat days you may see the SPX lead. The market mechanics involved, from brokers and institutions dictate that futures lead.
You need to have a live "Prem and Disc" to Fair Value running real time to see what I'm talking about.
All the best,
Don
I do agree about the inconstency of data feeds.
Ok. I will take your word for it. I must admit during the time that I watched this, the market was dead. Thus, I was not trading much and instead exploring other things, such as the fast cash. I did have FV calculated real time.
Quote from SDticks:
Ok. I will take your word for it. I must admit during the time that I watched this, the market was dead. Thus, I was not trading much and instead exploring other things, such as the fast cash. I did have FV calculated real time.
Something to look for is when you see .75+ premium in the futures, check the spx and the indu...generally you'll see a short term upward move, sort of a rubber band pulling effect. When the premium flattens out (parity) the traders sell back the stocks.
All the best,
Don