What cause of price movement in futures market?

[Gogol]

Hi all!
Tha question here is: what is moving price at futures, let's say ES or YM. Who can explain the core?
It doesn't look the price reflects supply/demand ratio, who is pulling the string? :?:

 

[LoveToTrade]

Hi all!
Tha question here is: what is moving price at futures, let's say ES or YM. Who can explain the core?
It doesn't look the price reflects supply/demand ratio, who is pulling the string? :?:

"The Expert" :smart: probably. ROFL.

 

[Jack Hughes]

Hi all!
Tha question here is: what is moving price at futures, let's say ES or YM. Who can explain the core?
It doesn't look the price reflects supply/demand ratio, who is pulling the string? :?:

Geppetto?

 

[dcraig1]

Hi all!
Tha question here is: what is moving price at futures, let's say ES or YM. Who can explain the core?
It doesn't look the price reflects supply/demand ratio, who is pulling the string? :?:

Regardless of what it "looks like" price goes up when buyers are on balance more aggressive than sellers and down in the inverse situation. Thats the nature of a 2 way auction market.

In futures it may be useful to think about two sets of supply and demand - supply of and demand for longs and supply of and demand for shorts.

No strings required.

 

[robster970]

ES is used for 2 things:-

1) Used for hedging positions that are held in underlying equities by the main market participants
2) For speculation in it's own right

 

[Gogol]

ok, take a closer look for price motion, its following main index very closely and just repeat all movements. It just flies over all bids or asks, no chance to execute these orders...

 

[FXTrend240]

:idea:

 

[Gogol]

:idea:

what is Q ?

 

[Gogol]

ok guys. Then explain me how come all prices at futures moving simultaneously?

 

[robster970]

I don't think any of us really understand what you're asking.

 

[Gogol]

I don't think any of us really understand what you're asking.

Open ES and YM in 2 windows and watch for prices..


I just assumed that price at futures calculated at real time according to main index and not present balance of supply/demand like in stocks.
If someone knows how this market works educate me :smart:

 

[robster970]

ES is a futures contract that is bought and sold independently of th S&P Index.

However the value of the index and the value of the futures are correlated because index arbitrage occurs. They move independently but are highly correlated, much of the time. Sometimes the ES leads the main index (affects what people buy/sell in stocks) and sometimes the index leads ES.

That's how it works.

 

[N Rothschild]

the futures market is not linked to the main index. the futures market leads the cash. they are both kept in sync with each other through arbitrage. i.e buying one and selling the other when the spread widens.

 

[N Rothschild]

beat me to it robster!

 

[robster970]

You said it in less words so you win dude ;-)

 

[Gogol]

they are both kept in sync with each other through arbitrage. i.e buying one and selling the other when the spread widens.

:clap:

that's what I want to know, what is arbitrage and how they keep them sync.

 

[N Rothschild]

well, say if the ES is trading higher than the Cash index what the arbitragers would do is short the ES and buy the cash in the form of a basket of stocks or perhaps the SPY (im not an arbitrageur) which then causes the spread or the difference between the two to converge.

 

[Gogol]

the futures market is not linked to the main index. the futures market leads the cash. they are both kept in sync with each other through arbitrage. i.e buying one and selling the other when the spread widens.

well, say if the ES is trading higher than the Cash index what the arbitragers would do is short the ES and buy the cash in the form of a basket of stocks or perhaps the SPY (im not an arbitrageur) which then causes the spread or the difference between the two to converge.

You mean arbitrageur is like market maker or simmilar to him? and this "arbitrageur" has unlimited buying power, so he can manipulate the market

 

[Jack Hughes]

the futures market leads the cash

That's what I used to believe, but it's not always true, as a bit of Googling will confirm.

 

[N Rothschild]

thanks for that wonderfull insight