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In-Reply-To: <3CC7072A.B139B818@xxxxxxxxxxxxxx>
That's very interesting and very helpful. Thank you very much and a big
thanks to all who replied.
Cheers,
Ian
> Sometime ago, I spent the better part of a week on the CME floor,
> generally
> around the S&P pit. What I found were guys at desks with Globex
> terminals
> doing exactly what the other respondants to your post mention.
> Specifically, they watched the hand signals in the pit with one eye
> and
> their Globex screen with the other, and when their "eyes" got out of
> line,
> BAM! A quick quarter to half a point, about a risk-free as you could
> get.
> And no, these guys were not playing onesie-twosie. One of the
> benefits of
> "membership."
>
> Also, one of my impressions was that one of the big games played
> around the
> pits is "who's got size?" Cause if it becomes clear that Solly or
> Merrill
> etc. is working a 1000 car order (whether they show it or not), it's
> showtime --- spreads become more prevalent, providing food for the
> arbs.
>
> I don't have a Globex terminal myself, but my recollection is that it
> is
> possible to program them for placing spread orders (with one click),
> and if
> so, that makes placing & executing pit/E-mini spreads about as
> efficient as
> for naked positions --- one advantage in having a Globex terminal.
>
>
>
> Ian Waugh wrote:
>
> > In-Reply-To: <200204241826.g3OIQD8A019508@xxxxxxxxxxxxxxx>
> > Ah... I had wondered about that but the prices move so quickly -
> > especially the emini - that I wondered how it could be possible.
> >
> > So do the arbitragers wait for a certain spread - say half a point
> > (I
> > rarely see spreads this size for long) and then jump in? I've
> > plotted
> > the two the charts on top of each other and they are so close they
> > could
> > be twins! How do they guarantee getting a good fill on the emini?
> >
> > Is this just a game for the big boys?
> >
> > Cheers,
> > Ian
> >
> > > > The S&P is open outcry and the S&P emini is electronically
> > > > traded
> > > > yet they usually manage to move together and stay within 0.25
> > > > point of each other, even in fairly fast-moving markets. How
> > > > come?
> > >
> > > Arbitrage. You can effectively exchange 5 ES's for 1 SP. So
> > > suppose
> > > the SP is currently at 1234.00 and the ES is at 1234.50. You
> > > could
> > > buy X SP's, sell 5*X ES's, and have a risk-free profit (after
> > > costs,
> > > which are very low for the people/institutions doing this). You
> > > could hold the long SP / short ES position until the spread moves
> > > the
> > > other direction, at which time you exit both positions for another
> > > risk-free profit. Even if you don't, I believe you can cancel out
> > > the positions because they're basically the same thing, but I'm
> > > less
> > > sure about that.
> > >
> > > Risk-free profit draws large money. Large money thrown at
> > > aberrations like that tends to make the aberrations go away. Why?
> > > Buying pressure on the SP makes it go up, selling pressure on the
> > > ES
> > > makes it go down, and *poof* -- the spread between them vanishes.
> > >
> > > Gary
> > >
>
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