Stocks & Commodities V. 24:9 (26): Q&A by Don Bright
Confused about some aspect of trading? Professional trader Don Bright of Bright Trading (www.stocktrading.com), an equity trading corporation, answers a few of your questions. To submit a question, post your question to our website at http://Message-Boards.Traders.com. Answers will be posted there, and selected questions will appear in a future issue of S&C.
Where does ES price come from?
ES = (SPY price)/factor + time premium
Now that I know that e-mini price is not direct, what bids and asks should I look at to detect where there is more pressure to gauge the future ES or ER2 price? Should I look at SPY or SPX, for example? óRobertM
You determine short-term up or down movement of the futures by the premium or discount to adjusted fair value. You take the spot price of the S&P, and add fair value for that day (check www.programtrading.com or www.indexarb.com for the daily number; there may be a slight difference, so take the average). When there is a premium, the market has an upward bias, and vice versa when there is a discount.