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To: MonsieurGonzo who wrote (30554)	12/7/1997 2:55:00 PM
From: Tom Trader	Read Replies (1) \| Respond to of 58727

Hi Steve -- good to hear from you Re "fair value" when it comes to the S&P futures, there are several postings and links on this thread made about two weeks ago that describes the concept quite well. Essentially, when the futures trade above fair value, one can sell the futures short and buy the basket of stocks that make up the SPX -- for a risk-free return and when the futures trade below fair value one would buy the futures and sell the stocks thereby unwinding the position. But it obviously requires a huge amount of capital to make it worth while. I worry less about how the fair value is computed and more about how one can use it for trading. Kevin, a few months ago, used to post on trading opportunities presented just as the fair value was violated and program trading has kicked in -- but one needed to be very nimble to do that. I believe that your definitions of "backwardation" and "contango" are correct -- I studied these terms years ago in England in one of the courses I did in commercial law. I have heard the "backwardation" term used occasionally here in relation to futures. I personally have never traded aluminium -- though I have dabbled in just about everything else at some point ranging from bellies to cattle, coffee to cocoa, cotton to lumber, beans to corn--even (if I recall correctly) flax-seed one isolated time for reasons that I cannot even remember. Now I trade only the bonds, S&P and currencies regularly -- though once in a while I get the yearning to trade the grains. Since you are into trading the aluminium futures, do you have any thoughts on the merits or otherwise re buying aluminium stocks at this point?? Regards