relationship of stock indexes to futures contracts

[JumpOff]

Well I've tried to have this discussion on other areas of this board without success, so I've come back to the "first steps" area to get some clarification. I have a feeling that my earlier questions about this were really out of context in the other areas, so I am hoping some focused attention here will clear it all up.

I have heard several experienced traders say that the index futures (FTSE, SPX, ES) can be traded just like other stock and commodity instruments, that they are subject to the same buying and selling pressure, and that their price moves accordingly. Further these experts say that a rise in the futures is a leading indicator (or that it causes the index to rise). I expect they mean a rise in the futures gives people confidence to purchase the stocks which make up the index - therefore the index rises. These traders are adamant that the price of the future is not controlled by the calculated fair value.

Since I am so confused about the subject I am willing to accept what these actual trading experts say for now. But oh- how my head hurts when I contemplate the subject- I would have thought that arbitrage players would bring the futures contracts into some kind of relationship with the index.

Would someone be so kind as to post a daily chart that overlays the nearest future contract and the calculated fair value of the index? I expect a picture will make a believer out of me.

If you want to use words to explain this, please use an example. If you can include a chart or two, that would be useful.

Thanks in advance.
JO

 

[stevet]

i did reply to this post -but then i read on another thread that my posts have been removed and/or changed - so i cut the reply on here and wont waste anyone's time by replying to threads

 

[BBB]

Typical.

An experienced and knowledgeable trader gets his posts removed again. No wonder this site is turning into the blind leading the blind. Discussions cant seem to go beyond 'What is a future' or 'What is a limit order' without someone getting upset because they can't admit they know jack.

Unfortunately, you cant make an omelet without breaking a few eggs. Thats life. Unfortunately the over zealous moderators strike again. My sympathy is for Sharky as his business will undoubtedly suffer as the knowledgeable traders leave in disgust at the way the boards are 'moderated' , conversations will not be allowed to progress and eyeball rates will fall - along with the advertising revenue.