From the August 01, 2012 issue of Futures Magazine • Subscribe!

Crossing boundaries with E-mini index options

Spreading opportunity

The close correspondence between percent changes in Nasdaq 100 and Russell 2000 mini futures, shown on “Daily percent changes” (below) suggests the possibility of spread trades. We can use options to take advantage of this relationship. Over the two-month period, there are several dates on which the percent changes diverge and then return to small or zero differences. Plus or minus changes larger than 2% were reversed in relatively short times. 

Even more closely related are the combinations of the S&P 500 and Dow Jones Industrial Average, along with their associated mini futures and options. When the primary futures contracts are out of sync with the minis, it is possible that corrections in pricing will lead to spread profits.

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