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> I trade the SPY on an intermediate ---> longer term basis. The most
> important thing you should know about it if you plan to trade shorter
> term is that the price tends to follow the SP500 futures - not the SP500 cash.
> The second most important thing is you have to be able to convert prices
> in 32nds and 64ths off the top of your head <g>. Of course - you can't
> use the same leverage with the SPY that you can use with the futures.
> If you're a beginner - that's probably an advantage. Robyn
There are three important points to make about the Spiders, which anyone
who trades short-term would and should know.
1. Contrary to the above writer's opinion, Spiders are priced off the CASH
index. Wait until the last week in June, or go back to the end of March,
and see for yourself whether the SPY is closer to the index or the futures.
The big marketing push for Spiders is toward those who are longer-term
traders/investors in the index mutual funds, not for short-term traders.
2. The spread in the Spiders is often at least 10 times that in the
futures, which makes it very difficult to successfully trade them short-term.
3. Spiders can be shorted on a downtick, which gives you an advantage
that you do not have in stocks. This advantage would be for both those
who are trying to trade Spiders short-term, as well as those longer-term
traders who are being panicked by a market freefall and would like to
hedge positions.
Neal
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