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Strategies & Market Trends : Shorting SPY for fun and profit.
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To: JDinBaltimore who wrote (321)11/4/1999 11:16:00 AM
From: fut_trade  Read Replies (1) of 346
 
I look at it like this (I'm no expert though). When there is good/bad news before or after equity market hours -- institutions will buy/sell S&P 500 futures. When the equity markets open there will be a differential between the futures and equity markets. A profit can then be made, for example, by borrowing money to buy stocks in the S&P 500 and at the same time selling the futures. The institution would then hold the stocks until the futures expire thereby locking in a gain. Thus if the futures are up a lot at the market open, there will be buying pressure on the stocks in the S&P 500 until the differential between the futures and equity markets is removed, that is, the cost of borrowing money to buy stocks is about equal to the difference between the futures price and the cash value of the S&P 500.

I see the opening premium as a very short term indicator.
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