Tuesday, July 14, 2009

Futures spreads

I've been a bit out of things lately, a little dismayed at getting done by this rally. It appears that my experience is insufficient for predicting the timing of the future, so for this I turn to a source vastly better at making timing predictions - the futures market.

As I explained earlier, the futures market is chained to the stock market because it will be forced to match upon expiry of the contract, and so it never seems to drift more than about 35 points apart. From this I'll define a scale from -50 to 50, where -50 is "The End of the World approaches" and 50 is "Everlasting World Peace any time now".

The September spread is -35, or "Oh my god didn't there used to be an economy", the December spread is -30, or "Well, looks like the economy is still here... maybe we really have bottomed" and the March spread is slightly different because betting on it is less liquid - but it's between -36 and -60, which places it somewhere between "The economy is no more" and "The world is no more". I really hope it's the former.

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