Replies to post #2448 on Short Term Trading Member Forum

[xe2dy]

Ok, thank you. The word 'arbitrage' is not one I use very often, so here is the definition:

The purchase of securities on one market for immediate resale on another market in order to profit from a price discrepancy.


Example:


The simultaneous purchase and sale of substantially identical assets in order to profit from a price difference between the two assets. As a hypothetical example, if General Electric common stock trades at $45 on the New York Stock Exchange and at $44.50 on the Philadelphia Stock Exchange, an investor could guarantee a profit by purchasing the stock on the Philadelphia Stock Exchange and simultaneously selling the same amount of stock on the NYSE. Of course, the price difference must be sufficiently great to offset commissions. Arbitrage may be employed by using various security combinations including stock and options and convertibles and stock. See also basis trading, risk arbitrage.

[methodibd]

Sorry, BlissBull, I'm not following.

1. "High volume means oversold to some."
......OK, I get that

2. "Some bullish QQQ traders willing to pay a premium."
..... OK, I get that

3. NDX/QQQ arbitrage
..... I don't get the predication of this upon point 2 above.
..... I can understand that, in a bullish environment, QQQ undervalued (somehow) relative to NDX would cause arbitrage selling of NDX and corresponding buying of QQQ. But my understanding of arbitrage is that the price differences are small anyway, and paying a premium would eat up most of the arbitrage, no?
..... BTW, what vehicle is used to trade NDX? Is that a future?

[Dimension]

agree on high down/up volume. as such, i am taking down my "short the bounce" banner for one day. i believe we are due for yet another relief bounce based on very negative breadth again and again, the TRIN and TRINQ are not reflecting, imo, the picture on the charts. as such, i went long the QQQ@34.25 near the close today. If there is a bounce, i likely will be looking to short it (though not as certain as the last weeks calls).

ndx made a new low, but would have like to see 1368 tested. there may be one more attempt i feel....but i also think bulls are around the corner. Option activity on the indices contrasted with that of activity on the equities. significantly more puts were bought on the indices. However, even though much more calls were bought on the equities, when we look at just the QQQ (which falls in the equities category), and take a peak at september, the number of puts bought, far exceed the number of calls bought. These two (index and qqq activity) could mean that the big boys are buying and beginning to hedge with the farther out puts...so, while not implying an immediate bounce, it is bullish. the one catch are the August 35 strike. volume on the 35 calls came in at 55K, far exceeding any other contracts. If most of that 55K is removed from the OI at August 35 calls, then it could be interpreted as bullish. but if it increases, then that could be a sign of further downside near term. right now, 34 looks safe on the QQQ and buying any dip to that area looks like a good trade...

imo...