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At 07:11 PM 5/16/99 -0700, Neal Chabot wrote:
>> 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.
Is it the bid or the ask that tracks the cash?
Based upon my last conversation with the specialist, they use the future to
get the bid/ask. This has to be because the specialist has to be able to lay
off his risk in the next most liquid market and that is the futures. At one
time the price was computed in an excel spreadsheet that took the future price
and calculated the bid/ask. IT is not a straight 1 to 1 calculation and there
is a big factor for liquidity and there is the larger spread you spoke of.
Exceptions to this is when the specialist has an inventory or simply wants to
avoid getting one which is generally when a day trader wants to trade. As you
probably already know there are a lot of games a specialist can play to make
you think you are getting fair value.
The period just before closing is the craziest.
The product is designed for market timers and not day traders. However, even
this raised problems managing the underlying portfolio( which, BTW, is a
special UIT) and complying with regulatory requirements initially. This
should
not be the case anymore however.
Cheers
***This includes information from sources believed to be reliable
and accurate as of the date of this publication, but no independent
verification has been made and we do not guarantee its accuracy or
completeness. Opinions expressed are subject to change without notice.
This should not be construed as a request to engage in any
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