Jim, sorry I didn't get back to you. I think your post was the only one I forgot to respond to since I got back from vacation.
I guess the point you are making is that the buy/sell programs kicked in before your signal indicated it to happen. This is possible because not everyone uses the same assumptions. For instance, the cost of buying the entire basket of stocks can be different for each company doing this, hence different index points added and subtracted from the fair value to give different levels. The difference is only slight, but obviously enough to miss the boat.
The other reason is the fact tat a computer may be programmed to give the signal "early" instead of "late". This means, a company doesn't want to miss the boat, so they'll tighten their range a bit and they will get the signal early.
The one thing that I'd use in combination with this to give strong buy/sell signals is intraday block money flows for the SPX. Unfortunately, this is something which is hard to find for many (I have it on my Bloomberg). What will happen, for example, is a divergence in money flows indicating a gap to the downside. At this point, you start to monitor FV closely, and go for the early signal. The two together should work good.
The problem with this is time consumption---the signals won't hit often (combined), but when they do you need to load up on puts/calls and make it worthwhile til the next signal.
I do things like this when I'm not getting any decent buy/sell signals in the market for individual stocks. That's the only time that I have enough time on my hands to babysit the screens enough to find a good FV play.
I'll review your older post and my original post tomorrow.
Take Care. |
