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To: Electric who wrote (37697)	3/30/1998 4:38:00 AM
From: Patrick Slevin	Read Replies (1) \| Respond to of 58727

I had to go over to the site to see what's available. I started out picking up information from his remarks on Jag Notes in 1992. Basically, Jag Notes only let me know if he thought one should be long or short each day. When I left trading in NY for trading from my home I lost access to Jag Notes. Two and a half years ago I started to trade OEX full-time. By early Fall of 1996 I had started to slip. For whatever reason I remembered Camp, dug up his phone number and subscribed to the OEX service. It waas less costly then, perhaps $700 a quarter. My logic was that I could win/lose $700 in a few minutes; why not try it for a quarter and see how it worked out. You have to keep in mind, I trade every day. In the last week I have turned down invitations to play golf in Palm Beach, Myrtle Beach. and Marco Island/Naples because I would spend too much time away from trading. Camp's service, no matter which one, would not help a part-time trader very much in my opinion. Not if that person expected to put on a trade on Monday and come back in a week and see howzit doin'. You may see on his site that such-and-such a day, 3 days off, should be up/down because of a Full Moon or a Tidal Wave or something but (In my opinion) traders don't set up Thursday's trades on Monday so it's a nice piece of information but just something to file away until late Wednesday. So anyway, the service worked for me; Camp was on a tear and was crushing the market for weeks. This, of course, cannot go on forever. But I was relying (overmuch) on the info and when he started to miss, so did I. So I took the seminar. Kicked butt immediately. Always have after a seminar; I've been to three. Sort of a tune-up when I am trading poorly. Anyway, once the OEX split so did I....I switched to the futures letter for $995, not the intraday one. I've never felt I needed the intraday one....I imagine it may be worth it. However, I find that taking a proper position once or twice a day can far exceed trading like a bat out of hell so I don't want to know that I should get in or out more times than that on an intraday basis. Besides, when trading in NYC I found that consistently getting in and out of trades was stressful and made record keeping a chore. Further, I have learned where I should enter and exit. I do not do this very well every time; but I do not need someone else looking over my shoulder. So that's that part. ~~~~~~~~~~~~~~~~~~~~ Next was the FV part, I think. Nope. It was how often do I trade using this info? Every day. But I don't always rely 100% on his times, I try to forecast my times first....then I compare them to his. Even if some of his line up exactly with mine; there are other pieces of information to look for during the course of the day that may invalidate these times. An obvious invalidation may be a recommendation to short the rally expected at 8:45 CT....but an unforeseeable event caused a selloff right from the open. There are also less obvious reasons why that reco may not be suitable, even if the market is moving up at 8:45. It's quite possible one should back off for awhile until conditions are right. There are subtle things to look for. But this takes some experience; trading right off his times is not something anyone with experience would do blindly. The times are hints....high probability points where turns should occur. They are not cast in stone. This is why I said the advisory is difficult to read. Unless he is on one of his (amazing) rolls, and they never cease to shock me, relying 100% on his times will cause you some stress. The (valid) assumption he makes is that you are a trader and you know how to trade. If his entry is incorrect but you acted on it....well, you better act on it again and get yer butt outta there. I think I'm fast approaching a TSO record for length of post. Fair Value. FV is a function of time because the futures contract has a life.....the current "front month" expires in June. By June the FV will be approaching zero. ~~~~~~~~~~~~~~~~~~~~~~~~~ It occurs to me that I better submit this now. If I type this entire thing just to have the machine go down I won't be disposed to do it again.

To: Electric who wrote (37697)	3/30/1998 4:59:00 AM
From: Patrick Slevin	Read Replies (1) \| Respond to of 58727

I think the only part left is tracking FV to see if programs hit. As Jim would say, people rely a lot on information. You might listen to CNBC say that programs just hit. Maybe CNBC gets this from a floor trader or maybe they get it from someone else, I don't know. Actually I don't care. Once the program hit it is too late to do anything about it. More profitable is to anticipate a program and it's direction. For example, if you know FV is $10.00 (to take a number), but all morning the bias has been slightly south of $10 then you might be predisposed to believe that programs, for the time being, would have a bias to be sell programs. But where are they going to hit? Well I suppose that you could just go short and wait for them, but they may never hit. Several people, including Hank, determine where the PREM should cross to create a program. So watching PREM provides a clue. Anyway, unless you are running off a live feed all of this becomes impossible. I've noticed quite often when I am on the phone to Chicago, making a trade, the trader on the other end gives me a fill precisely where the market is ticking on my machine at the moment. If you have ever seen the way the S&P futures jump around like Mexican jumping beans you would know this is pretty good. You should not have much delay with respect to your data. Otherwise, very little of this will do you much good.

To: Electric who wrote (37697)	3/30/1998 12:57:00 PM
From: broken_cookie	Read Replies (1) \| Respond to of 58727

Electric, Here is some of Kevin's posts on fair value. Fair Value = the actual futures less the cash index. When this 'spread' reaches a certain level, the upper or lower bound, computer guided program trading kicks in. The reason being is that it is cheaper to own the S&P 500 futures contract and sell the actual basket of stocks (the S&P 500). Other times it's the reverse. In this post, I teach how one can calculate the theoretical futures price on their own if they have the proper data avilable to them. Hi Leland. You would probably be better off calulating this on the fly because it changes throughout the day (since the cash index changes throughout the day). However, you may find it difficult to find some of this info. Does your data service have this info: SPX live pricing? SPX dividend info (need to know future dividends til exiration)? SPX index divisor (you need to calculae future dividends into index points)? Yield on a risk free rate (6 month T-Bill will work)? SPX Futures live pricing? Here's what you do. Translate future dividends (til the Sept 19 expiration) into S&P index points. Future dividends=$19,221.749469 (in millions approximately) SPX divisor=7719.5781 dividends / divisors = 2.49 This is dividends in index points. Now take the cash index 950.30 and multiply by the risk free rate. The risk free rate is over 365 days, so (5.27% / 365 days) / 47 days til expiration = .6786% 950.3 * 1.006786 = 956.748 subtract the dividend points you calculated (2.49) from 956.748 amd you get 954.26 This is the theoretical futures price at yesterday's close. Not sure if it's feasible for you to calculate this on your own or now, but figured I'd give you an example of the calculation. I'm currently working on a calculation for theoretical cash and seeing what its value MIGHT be. Just started working on it...I calculate the value, but I'm trying to test its value. This next piece should describe the rest. After you have that number you need to calculate the upper and lower bounds. To do this, you need to account for transaction costs to either buy the entire cash index or sell it. The assumption I have is .15%. .15% of the S&P 500 total market value is $8640 [in millions] (remember, this is the assumed cost to either buy or sell the entire basket). $8640 translated into index points is $8640 / S&P500 divisor. I can't give you the divisor (I thing S&P would sue me), but the answer is 1.13 index points. Now you take the theoretical futures value and subtract it from the actual cash nidex. 758.27 - 753.53 = 4.74. This is the FAIR VALUE. Take the FAIR VALUE and add 1.13 to it (the transaction costs in index points) for the upper bound, and subtract 1.13 from the FAIR VALUE for the lower bound. 4.74 + 1.13 = 5.87 4.74 - 1.13 = 3.61 Upper bound = 5.87 lower bound = 3.61 I mentioned ealier that you calculate the spread between the cash index and the actual futures contract... 762.00 - 755.22 = 6.78 6.78 is above the upper bound right now which is indicating computer guided buy programs. (anything below 3.61 would be a sell program). That should explain how to calculate Fair Value for an arbitrage play, but I want to clarify something. An arb does not buy or sell the SPX when changing his position. Nobody could afford to buy thew enitire SPX basket...not even Bill Gates (sorry Bill) :-) Instead what arbs do is buy a basket that REPRSENTS the SPX. Currently the SPX Sep futures contract is valued @ $462,900 (futures price * $500 (which is the value of 1 point). The arb will take the % breakdown of the SPX (stock by stock) and buy the same % of the $462,900. For example, GE is 3.071% of the SPX. So the arb would buy $462,900 * 3.071% = $14,215.66 worth of GE which is almost 213 shares. They'd continue down the list and purchase each of the 500 stocks the same way. I used 1 futures contract as an example, but the arbs deal with about 100 contracts (close to $50 million alot of the time and even more). They also buy stock in round lots, so their basket is slightly different than thre SPX but not by much.