The PremWhat It Is And How To Read It - (Prem Is A Typical Symbol For The S&P 500 Premium)
The PREM in this discussion will refer to any of the following.
S&P Premium Nasdaq Premium Russell Premium Symbols here are based on Tradestation.
The Premium is the difference between the futures and the cash index.
The calculations are basically @SP.
P - $INX = SP Premium, $NQIQX - $IQX = Nasdaq Premium, $ER2IUX - $IUX = Russell Premium.
However, the actual calculation of the premium is a bit more involved.
_ The PREM is calculated tick by tick, every time that there is a trade for @SP.
P, TS uses this value of @SP.
P minus the previous value of the $INX to calculate the tick of the $spinx.
_The same procedure is used with the $INX.
_The values for the minute bar are taken from the tick data generated for the $spinx itself.
_Since not all stocks in the $INX open at the same time, the first few minutes of the $INX will be inaccurate.
_Consequently, the PREM will also be inaccurate until all stocks have opened.
_I adjust for this by using a custom session time that opens at 8:32.
_Additionally, since the futures close at 3:15 cst while the cash index closes at 3:00 cst.
any PREM delivered after 3:00 cst is wrong.
HOW TO READ THE PREM Rule # 1 Look at the right part of the bar.
Use a 1 minute chart.
The high of the S&P 500 FUTURES (spoos) corresponds to the high of the prem.
The low of the spoos corresponds to the low of the prem.
Rule #2 When ever there is a new high for the day on the prem, it means one of two things.
Either the prem is going higher or the spoos are going higher or both.
When ever there is a new low on the prem, either the prem is going lower or the spoos are going lower or both.
This may seem ambiguous, but its just a fact of observation.
Consider these scenarios.
THE MARKET IS SHORTING The prem hits a new high.
Read the high of the spoos.
If the spoos did not go any higher before they continued to short, a price point was created.
When the spoos turn, they will likely rally right back to the price associated with the last new high on the prem and likely go higher.
The prem hits a new low.
Read the low of the spoos.
If the spoos went no lower before they began to rally, a price point was created.
If the spoos turn and rally up a bit, likely they will short again and return right back to the price associated with the last new low on the prem and probably go lower.
The spoos hit a new low.
The prem hits a new high (rare).
The sell off is very likely over.
THE MARKET IS RALLYING The prem hits a new high.
Read the high of the spoos.
If the spoos did not go any higher before they fall back, a price point was created.
When the spoos turn, they will likely rally right back to the price associated with the last new high on the prem and probably go higher.
The prem hits a new low.
Read the low of the spoos.
If the spoos went no lower before they began to rally, a price point was created.
If the spoos turn and rally up further, likely they will short and return right back to the price associated with the last new low on the prem and probably go lower.
The spoos hit a new high.
The prem his a new low (rare).
The rally is very likely over.
Rule #3 New highs or lows on the spoos should be preceded by new highs or lows on the prem.
If they are not, the market is poised to turn.
Reading the PREM is not a strategy per se.
It is a leading indicator and can regularly predict where the spoos are going to go before they get there, especially when the spoos appear to be doing just the opposite.
New highs and lows on the prem are by themselves fairly decent indications of large institutional program trading going on, without necessarily knowing predetermined buy sell execution levels.
If the program trading is going on you best be sure not to trade in the opposition direction.
Our trading strategy takes these and other factors in to account thus producing very accurate and timely trades.
We invite you to consider our results and training course to help you become a more effective trader.
S&P Premium Nasdaq Premium Russell Premium Symbols here are based on Tradestation.
The Premium is the difference between the futures and the cash index.
The calculations are basically @SP.
P - $INX = SP Premium, $NQIQX - $IQX = Nasdaq Premium, $ER2IUX - $IUX = Russell Premium.
However, the actual calculation of the premium is a bit more involved.
_ The PREM is calculated tick by tick, every time that there is a trade for @SP.
P, TS uses this value of @SP.
P minus the previous value of the $INX to calculate the tick of the $spinx.
_The same procedure is used with the $INX.
_The values for the minute bar are taken from the tick data generated for the $spinx itself.
_Since not all stocks in the $INX open at the same time, the first few minutes of the $INX will be inaccurate.
_Consequently, the PREM will also be inaccurate until all stocks have opened.
_I adjust for this by using a custom session time that opens at 8:32.
_Additionally, since the futures close at 3:15 cst while the cash index closes at 3:00 cst.
any PREM delivered after 3:00 cst is wrong.
HOW TO READ THE PREM Rule # 1 Look at the right part of the bar.
Use a 1 minute chart.
The high of the S&P 500 FUTURES (spoos) corresponds to the high of the prem.
The low of the spoos corresponds to the low of the prem.
Rule #2 When ever there is a new high for the day on the prem, it means one of two things.
Either the prem is going higher or the spoos are going higher or both.
When ever there is a new low on the prem, either the prem is going lower or the spoos are going lower or both.
This may seem ambiguous, but its just a fact of observation.
Consider these scenarios.
THE MARKET IS SHORTING The prem hits a new high.
Read the high of the spoos.
If the spoos did not go any higher before they continued to short, a price point was created.
When the spoos turn, they will likely rally right back to the price associated with the last new high on the prem and likely go higher.
The prem hits a new low.
Read the low of the spoos.
If the spoos went no lower before they began to rally, a price point was created.
If the spoos turn and rally up a bit, likely they will short again and return right back to the price associated with the last new low on the prem and probably go lower.
The spoos hit a new low.
The prem hits a new high (rare).
The sell off is very likely over.
THE MARKET IS RALLYING The prem hits a new high.
Read the high of the spoos.
If the spoos did not go any higher before they fall back, a price point was created.
When the spoos turn, they will likely rally right back to the price associated with the last new high on the prem and probably go higher.
The prem hits a new low.
Read the low of the spoos.
If the spoos went no lower before they began to rally, a price point was created.
If the spoos turn and rally up further, likely they will short and return right back to the price associated with the last new low on the prem and probably go lower.
The spoos hit a new high.
The prem his a new low (rare).
The rally is very likely over.
Rule #3 New highs or lows on the spoos should be preceded by new highs or lows on the prem.
If they are not, the market is poised to turn.
Reading the PREM is not a strategy per se.
It is a leading indicator and can regularly predict where the spoos are going to go before they get there, especially when the spoos appear to be doing just the opposite.
New highs and lows on the prem are by themselves fairly decent indications of large institutional program trading going on, without necessarily knowing predetermined buy sell execution levels.
If the program trading is going on you best be sure not to trade in the opposition direction.
Our trading strategy takes these and other factors in to account thus producing very accurate and timely trades.
We invite you to consider our results and training course to help you become a more effective trader.