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Hi Al,
Don't think it's possible to take advantage of the price differences. The
most efficient institutional S&P arb programs need a minimum basket trade of
at least 90+ stocks. Well beyond my sphere of competence and capital at
least!
But I can tell you why the differential happens. The main reason you see
differences between the SPX and SPY is because the SPY includes the
accumulated quarterly dividend of the stocks in the SP500. It goes
ex-dividend the 3rd Friday of March, June, September, and December with the
dividend paid on the last business day of April, July, October, and January.
Basically, you don't want to be short on the ex-date unless you enjoy nasty
surprises from your broker!
SPY also continues to trade until 4:15, another of its advantages, whereas
the stocks that make up the SP500 are finished by 4:00. Of course, like any
stock it is subject to the same forces of supply and demand, market
volatility, etc.
I now prefer to trade the Dow Diamonds(DIA)instead of the Spider. Tracking
its 30 components in a trading strategy is a much easier proposition.
However, I find the Spider to be a better hedging vehicle for my total
portfolio.
hope this helps,
Rick
Tokyo, Japan
-----Original Message-----
From: Al Taglavore <altag@xxxxxxxxxxxx>
To: metastock@xxxxxxxxxxxxx <metastock@xxxxxxxxxxxxx>; Fasttrack EMail List
<fasttrack@xxxxxxxxxxxxxx>
Date: Sunday, August 09, 1998 9:09 AM
Subject: Re: Spiders
>While working on my weekly charts, I thought I would share the following
>info and expand upon my recent address to Bill Saxon's post.
>SYM week 4 wk ATR 1 wk ATR
>ES98U 8/7 49.08 83.04
> 7/31 38.06 33.04
> 7/24 40.00 64.08
>SPDR 8/7 4.05 6.13
> 7/31 3.14 3.11
> 7/24 4.00 6.06
>SPX 8/7 43.06 64.07
> 7/31 36.06 33.00
> 7/24 37.09 61.08
>SP98U 8/7 46.11 67.14
> 7/31 39.10 36.14
> 7/24 40.08 63.14
>(All prices to the nearest sixteenth)
>Since the SPDR is 1/10 of the SPX, then the price changes and therefore,
>the ATR should, theoretically, be the same. The ES is 1/5 of the
>SPfutures. While I am not spending time trying to determine why there is
>this descrepentcy, I sure would like to develop a way in which to trade off
>of it. Anyone can work a formula and backtest? Watch these 4 symbols on a
>10 minute basis, and
>you can see the disparities. (CME globex prices for the ES, CME RTH for
>the SP98U, Yahoo for the SPX and any on line broker for the SPDR)
>
>Al Taglavore
>
>
>> To: metastock@xxxxxxxxxxxxx; Fasttrack EMail List
><fasttrack@xxxxxxxxxxxxxx>
>> Subject: Re: Spiders
>> Date: Saturday, August 08, 1998 2:17 PM
>>
>> Also, the Spyders trade much like a future, that is, you do not need an
>> uptick to go short. The disadvantage of the Sypder/futures is the lack
>of
>> leverage. You do not have the premium, however.
>> I have been trying to develop an arb methodology watching the SPX, the
>ES,
>> and the SPX futures.
>> Amazing! They do NOT trade in lock step, as one might think. I also use
>> Brown&Co.
>>
>> Al Taglavore
>>
>> ----------
>> > From: Bill Saxon <bsaxon@xxxxxxxxxxxxxxx>
>> > To: Metastock EMail List <metastock@xxxxxxxxxxxxx>; Fasttrack EMail
>List
>> <fasttrack@xxxxxxxxxxxxxx>
>> > Subject: Spiders
>> > Date: Saturday, August 08, 1998 7:11 AM
>> >
>> > Might I slip a few words edgewise on TA (as opposed to MS)?
>> >
>> > I use Rydex for a portion of my portfolio to trade Nova and Ursa. I
>> think most
>> > are aware of the calculations that show Nova to go up a percentage
>point
>> less
>> > than an Index Fund like Vanguard (adjusted for the 1.5 factor) and down
>a
>> > percentage point more (and perhaps a little more than that).
>Apparently
>> this
>> > has to do with the Futures Premium involved or perhaps the fact that
>> dividends
>> > are not being paid.
>> >
>> > In addition there is no intraday trading (witness Tuesday when the S&P
>> was up 6
>> > pts in the AM when many would have exited, but by the time Nova could
>> have been
>> > traded was down 40 pts.)
>> >
>> > My understanding is that I can trade long and short S&P Spiders with
>the
>> > following advantages.
>> > 1. Intraday trading just like a stock
>> > 2. If traded at a place like Brown it is only $5 a trade. This has to
>> be less
>> > than the management fee at Rydex, of course depending on the dollar
>> amount
>> > traded.
>> > 3. What ever percentage that they go up would be equal to the
>percentage
>> they
>> > go down in relation to the S&P.
>> > 4. The money would be in place at a brokerage where other vehicles
>could
>> be
>> > used at an appropriate time as opposed to being locked in to the funds
>> offered
>> > by Rydex.
>> >
>> > There is always some downside. What is it??
>> >
>
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