Dow 2006

[frugi]

The difference is high because we have just rolled over to Jun 06 futures. Today's fair value on the Dow is around 81 points above the cash value.

Fair value is calculated by adding the cash value of the index in question to the interest I would have to pay my broker to borrow enough money to buy all of the stocks in it, minus all of the dividend cheques I would have received from those stocks.

http://www.indexarb.com/fairValueDecomposition.html

As time passes FV will fall to zero at or near expiry.

During the trading day the premium (futures - cash) will fluctuate around fair value. When it fluctuates more than a few points away from FV arb programs kick in and either sell futs / buy stocks or buy futs /sell stocks to kick the cash - futs relationship back into line. This activity only forms a small proportion of 'program' trading.

The indicator at the bottom of this chart shows this fluctuation in a range of 10 odd points, albeit crudely and I suspect rather inaccurately. There are no PREM figures available from IB so I had to build my own. :-(

 

[chimpmagnet]

Nice post Frugi, good explanation.

Ever thought about CFDs as opposed to spread betting futures? The spread on a CFD trade is around 6 points though I imagine trading fees could be higher.

On another note, looking at the DOW now it's struggling to move higher given the immediate resistance and higher Oil prices. Still holding a short term covered warrant at 11k, will see if it proves to be a good move or not

 

[leovirgo]

Anybody short from 11100+?

 

[mombasa]

Anybody short from 11100+?

would be if i wasn't maxed out and trying to break even at 11,023

 

[leovirgo]

would be if i wasn't maxed out and trying to break even at 11,023

My short from 11110+ has been covered around 11050+. I guess 11030/40 area would be the lows for today. Anyway, good luck !!

 

[kriesau]

My short from 11110+ has been covered around 11050+. I guess 11030/40 area would be the lows for today. Anyway, good luck !!

Really good call especially as it's now back to 11090.
I thought about going short at 11100 earlier today buy didn't - cie la vie

 

[Bigbusiness]

Oil is on the move today.

http://www.futuresource.com/charts/charts.jsp?s=CLJ06&o=&a=V:60&z=610x300&d=medium&b=bar&st=#

 

[kriesau]

Day Of Reckoning !

There will be a day of reckoning one day - the big question is when !

http://www.gillespieresearch.com/pdf/779-626538446.pdf

 

[Racer]

(MarketWatch) -- The central bank governor of the United Arab Emirates suggested the country may switch up to 10% of its $22.5 billion in currency reserves into euros,

http://www.marketwatch.com/News/Story/Story.aspx?guid={2986D561-727A-4C8D-A088-6857CFFABDB1}&siteId=mktw

 

[Pat494]

would be if i wasn't maxed out and trying to break even at 11,023

I wonder if you exited some of your shorts yesterday ? Looks like the gods are smiling on you this time, but what about next time ? To average or not to average !!
Accurate call by Leo yesterday.
Today 2 of my systems reckon up and 2 down, where's my lucky coin..............

 

[mombasa]

I wonder if you exited some of your shorts yesterday ? Looks like the gods are smiling on you this time, but what about next time ? To average or not to average !!
Accurate call by Leo yesterday.
Today 2 of my systems reckon up and 2 down, where's my lucky coin..............

No i didn't but looks like today may be a down day so will start scaling out.

 

[Pat494]

What I find really irritating is to exit for a loss and then it reverses into what would have been a profit !!
But that's trading

 

[Racer]

What I find really irritating is to exit for a loss and then it reverses into what would have been a profit !!
But that's trading

'They' do that deliberatly to annoy you and take your money

 

[leovirgo]

Happy to ho short once it penetrates above 11130/40. It is trying to test yesterday's high 11116 again. Other than that, there may be false moves, like break out from intra day range, for a few hours IMO.

 

[Pat494]

'They' do that deliberatly to annoy you and take your money

The re-incarnations of Dick Turpin, Ned Kelly, Al Capone and other sundry rascals I expect !!

 

[Morris]

11,100 proving difficult to crack at the moment.

 

[leovirgo]

It's now broken out of 11100. The higher it is the better to go short. It is in the selling zone.

 

[Morris]

Hmm.... think I'll pass on that...

 

[Racer]

"The current account deficit breached the -7.0% of nominal Q4 GDP level for the first time ever & according to BONY's Mike Woolfolk "it is notable that at -7.0% of GDP, the US current account deficit is now twice the -3.5% level that prompted the G7 to devalue the USD following the Plaza Accord of 1985"."

 

[kriesau]

Anyone else short here yet - how about you Leovirgo !