I have a tough time understanding the rationality for the pricing on the nasdaq emini futures sometimes.
During the day lately, they seem to trade in the range of about a plus 3 to 5 over the cash index. Yes, sometimes they trade for a bit more or less, but it is fairly consistent.
But during pre-market hours, I have seen HUGE premiums for the futures. Yesterday morning july 17th was thew most drastic example I have ever seen.
At 8:15 AM EST the pre-market indicator published by the Nasdaq marketsite opened at 1024, but the futures were trading at a whopping 1038 or higher. That is a 14 point premium above the level where the cash index would be if the market were open for regular trading. This to me seems very extreme.
And this huge premium was maintained for most of the pre-market period, slowly dropping to a premium of about 12, then 10, then 8. Finally in the last couple minutes, the pre-market indicator surged and the "normal" premium of about +5 was restored at the market opening 9:30 AM.
But I don't quite understand why anyone would want to pay such massive premium prices on the futures in the pre-market? How can anyone justify paying up to +14 more points than the cash index, when you know the premim will eventually drop back to a level of plus 3 to 5 during regular trading hours.
As it turned out, those that bought them in pre-market yesterday morning were rewarded, because they kept climbing, going from 1038 to about 1050, before turning back to about 1045 just as the market opened, and then rocketing upward.
Do some experienced traders see something here that I am missing? How can you account for such a high premium sometimes during the pre-market? Are traders foolish to pay such high premiums above the (assumed level) of the cash index? Or do they know something most of us don't and are taking advantage of such info?
During the day lately, they seem to trade in the range of about a plus 3 to 5 over the cash index. Yes, sometimes they trade for a bit more or less, but it is fairly consistent.
But during pre-market hours, I have seen HUGE premiums for the futures. Yesterday morning july 17th was thew most drastic example I have ever seen.
At 8:15 AM EST the pre-market indicator published by the Nasdaq marketsite opened at 1024, but the futures were trading at a whopping 1038 or higher. That is a 14 point premium above the level where the cash index would be if the market were open for regular trading. This to me seems very extreme.
And this huge premium was maintained for most of the pre-market period, slowly dropping to a premium of about 12, then 10, then 8. Finally in the last couple minutes, the pre-market indicator surged and the "normal" premium of about +5 was restored at the market opening 9:30 AM.
But I don't quite understand why anyone would want to pay such massive premium prices on the futures in the pre-market? How can anyone justify paying up to +14 more points than the cash index, when you know the premim will eventually drop back to a level of plus 3 to 5 during regular trading hours.
As it turned out, those that bought them in pre-market yesterday morning were rewarded, because they kept climbing, going from 1038 to about 1050, before turning back to about 1045 just as the market opened, and then rocketing upward.
Do some experienced traders see something here that I am missing? How can you account for such a high premium sometimes during the pre-market? Are traders foolish to pay such high premiums above the (assumed level) of the cash index? Or do they know something most of us don't and are taking advantage of such info?
