How IG Index calc's overnight DAX quotes

[eureka]

i know some dax stocks must trade in Japan/Asia for example - i am wondering if anyone knows the specifics of how they quote dax futures overnight, i.e. outside of the EUREX trading hours - how they they hedge them..

also would be curios to see if anyone knows how they calculate / hedge their binary bets on FTSE and S&P, thx in advance.

 

[Directional]

IG doesnt hedge most of its trades anyway, and any extra risk they are exposed to overnight will be more than compensated for by the extra-wide overnight spreads they levy.

 

[eureka]

hm interesting - ok thx - so you mean they just slap a wider spread onto the eurex closing price? - looks that way most of the time - i am wondering because i look up their dax quotes at times when there is a big u.s. move after the dax close... - and it seems their quotes are quite way off sometimes from what "in my opinion" they "should be" based on the u.s. close..

 

[eureka]

however, i think they do adjust sometimes, like on the morning after the German elections, that big gap down.. - they must have some sort of a way adjusting, don't know if it's anything sophisticated...

 

[Mornington Crescent]

cant speak for IG but cmc have their own algorithm (they say) which is based on S&P.

but its like pulling teeth.

mind you I am not surprised they are so shy. the market gets pretty thin at times and that leaves them exposed on say Globex

 

[eureka]

ok, thx DoubleSix - this makes sense, i was guessing they must have some sort of a correlation type model - although the last few months as you know the european indices have been correlated with the u.s. much less than normal due to the big runup to the new highs...

 

[LION63]

If any trader were to believe or feel that the spread bet quote was way out of line with his/her perceived level, it would be simple to go in the opposite direction and make an easy turn/profit when the market opens. In practice, more often than not, one will find that the spread betting firms asve got it right and that would be a recipe for disaster.

The first thing to bear in mind is that the larger European companies (especially the FTSE constituents) have ADRs that trade in the US. This means that to a degree, it is fairly easy for them to calculate the index levels to within a few points. Whilst this may not seem effective, you only need to monitor the CMC quotes after the European markets close for a period of 4 to 6 weeks to see how accurate they are.

It is quite easy for the individual to work out the correlation between the FTSE and DOW between say 4.45pm and 9.30pm in order to understand how they work it out. After a few weeks it becomes quite easy to make a few points on a regular basis virtually risk free.