Dow and YM

[sirviente]

Hi,

Anybody knows why the YM (mini sized dow) has a 50 point difference
from the DOW itself ?

Regards
Ulises

 

[N Rothschild]

because its a futures contract as apposed to the cash market

 

[sirviente]

Hello Genics,

Yes, i understand the idea, but it is Fixed, at 50 points below. In theory, because of being futures, you would expect to go higher and lower, but the difference is always 50 points below. Why is that ?

Regards,
Ulises

 

[mechanicaldaytrader]

you can study how futures are priced and rolled over from contract to contract at the CME website...it actually is quote complex and has lots of math stuff in it...and it will never make you one dime in the market...

 

[sirviente]

I couldn't find any specs on the CME website, is it possible that you would help me find the link ? I think they are redesigning their website or something.

In any case, is there any way of expressing why its 50 points down briefly ? why not 50 up, or any other combination ?

Thanks
Ulises

 

[arabianights]

It isn't 50 points up for ever. At expiry it will be exactly equal. You will find that fifty points is the current fair value for arbitrageurs who will be long of the stocks and short the future or vice versa. Briefly the things to consider are interest rates and dividends although a more complicated system has to take volatility etc into account making it more an art than a science and in fact you will find most of the time it moves without these guys having to get involved at all.

 

[sirviente]

Who are these arbitrageurs ? Are they the ones who set the price difference in between the YM and the Dow ?