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To: Iceberg who wrote (16158)	9/4/1998 5:00:00 PM
From: Nemer	Read Replies (2) \| Respond to of 53068

Ice: You directed this to Dan, but I'll attempt an answer and he can add to or take away from it ...... =====> Would you please explain what "discount to cash" is, how you knew it happened, and what the importance of it is the easiest way to follow this figure of difference between cash and futures on the SPX which is listed on most quote and charting services as PREM ----- some of the services require the use of $PREM to get the info SP8U is the symbol for Sept SPX futures ---- SPX is the symbol for SPX cash PREM is the symbol for the difference between the two ...... and fair value for it today was in the area of 1.5 and to throw in some other figures --- sell programs were set for minus 2.00 and buy programs were set for 5.50 these buyandsell levels are of my making , they're not etched in stone and not readily available many places on the internet ---- and requires much more discussion than I want to do here ......gggg and I really shouldn't have brought them up ...... BTW ---- Thursday of next week, off the top of my head not confirmed as exact, we will switch to SP8Z ---- which will be the December futures as to the importance of it ....... for me it's just another set of the indicators that I follow during the day ..... perhaps Dan can expound on this entire post ....... and do a lot better job ...... Regards ---- Nemer

To: Iceberg who wrote (16158)	9/4/1998 5:36:00 PM
From: DanZ	Read Replies (1) \| Respond to of 53068

Ice, Here are some definitions that should answer your questions. Spread: The spread is the difference between the S&P 500 futures (F) and the S&P 500 cash index (C). The formula for calculating the spread is F-C. For example, if the S&P 500 futures last traded at 976.30 and the S&P 500 cash index last traded at 973.09, the spread is 3.21. Fair value: The S&P 500 futures settle on the third Friday of March, June, September, and December. As time marches forward, the futures converge toward the value of the cash index because the futures settle at the cash index upon expiration. A curve can be plotted that shows the fair value of the spread for each day in the cycle. I think the curve is logarithmic (maybe Nemer can verify). CNBC reports the fair value each day and Nemer reports it every now and then gg. Discount: A negative spread. This indicates bearishness in the S&P 500 futures pit. When the spread becomes sufficiently below the fair value, sell programs will be initiated. Premium: A positive spread. This can indicate bullishness in the S&P 500 futures pit. Normally, the spread is positive, but it's not until the premium becomes sufficiently above the fair value that buy programs will be initiated. Buy program: When the spread becomes sufficiently above fair value, arbitragers initiate buy programs by selling the futures and buying the stocks in the S&P 500 index. They reverse their trades when the spread returns back to fair value and the difference is their profit. Sell program: When the spread becomes sufficiently below fair value, arbitragers initiate sell programs by buying the futures and selling the stocks in the S&P 500 index. They reverse their trades when the spread returns back to fair value and the difference is their profit. At about 2:15 p.m. today, the spread between the S&P 500 futures and the cash index got to about -3.50. This is a very big discount and prompted arbitragers to initiate sell programs. Even worse, the futures traded at a discount to cash for at least 30 minutes prompting more selling. Since LSI is in the S&P 500 index, one might have expected it to get hit given the magnitude and duration of the sell program. The DJIA fell over 100 points in a short period of time but LSI held at 11 1/2. The bid even increased from 11 1/2 to 11 9/16 during this time. I think this bodes very well for the stock next week because it may give investors confidence that the stock has bottomed at 11 1/2, prompting more to hold and more to buy. Dan PS to Nemer: My connection went down just after I sent this the first time and I had to retype it. I see that you already answered Ice, but I spent too much time typing it and I'll be damned if I'm not going to send it ggg. Thanks for your input.