How is YM calculated?

[AbeSmith 10]

Hello folks. Sorry if this is a stupid question, but I've been wondering, how is YM calculated? I know it represents the Dow, but I don't know the details and can't seem to find it anywhere. I guess I'm wondering, how is it calculated? What are the factors that make it move one way or another?

[Blu-Ray 10]

Abe

 

It's based on the 30 stocks in the Dow Jones Industrial Average. Each stock has a different weight percentage. eg. IBM has the biggest weight at 6.78% of the index and Intel the least at 1.44%.

 

Here's a link to show you the 30 stocks and their corresponding weight.

 

http://www.indexarb.com/indexComponentWtsDJ.html

 

 

Hope this helps

 

 

Blu-Ray

[AbeSmith 10]

Abe

 

It's based on the 30 stocks in the Dow Jones Industrial Average. Each stock has a different weight percentage. eg. IBM has the biggest weight at 6.78% of the index and Intel the least at 1.44%.

 

Here's a link to show you the 30 stocks and their corresponding weight.

 

http://www.indexarb.com/indexComponentWtsDJ.html

 

 

Hope this helps

 

 

Blu-Ray

 

Thanks Blu-Ray. That helps plenty.

[brownsfan019 17]

What are the factors that make it move one way or another?

 

Buyers and sellers move it.

 

I know it sounds too simple Abe, but when they are more buyers than sellers, price goes up and vice versa. That's about as simple as it can get when trying to figure out what moves any market.

[Soultrader 12]

Simple. Trader psychology and supply vs demand

[walterw 10]

Simple. Trader psychology and supply vs demand

 

alias Delta jejeje... :rolleyes:

[GCB 10]

The Dow Jones Industrial Average is a price weighted stock index which is calculated by special formula based on the stock prices of what are considered the thirty most important companies in the US. These stocks change from time to time. In fact, only GE is left from the original DJIA.

 

The YM is a index future whose price is totally calculated by supply and demand, the buying and selling of futures. It takes its cues from the DJIA. But the DJIA also takes its cues from the futures markets. So it hard to say which comes first, the chicken or the egg. When the stock market and the futures get out of sync, arbitragers step in a buy (sell) one and sell (buy) the other. It's an amazing process but somehow works out.

 

Think of the market as sort of the Wikipedia of price. Everyone contributes and somehow we end up with something more or less representative of value, at least over the long run.

[AbeSmith 10]

The Dow Jones Industrial Average is a price weighted stock index which is calculated by special formula based on the stock prices of what are considered the thirty most important companies in the US. These stocks change from time to time. In fact, only GE is left from the original DJIA.

 

The YM is a index future whose price is totally calculated by supply and demand, the buying and selling of futures. It takes its cues from the DJIA. But the DJIA also takes its cues from the futures markets. So it hard to say which comes first, the chicken or the egg. When the stock market and the futures get out of sync, arbitragers step in a buy (sell) one and sell (buy) the other. It's an amazing process but somehow works out.

 

Think of the market as sort of the Wikipedia of price. Everyone contributes and somehow we end up with something more or less representative of value, at least over the long run.

 

So, let me see if I'm understanding this, the YM moves based on people buying and selling the YM. But when the YM doesn't go in tune with the Dow, then arbitragers step in and buy or sell to keep the YM in line with the Dow.

[AbeSmith 10]

Buyers and sellers move it.

 

I know it sounds too simple Abe, but when they are more buyers than sellers, price goes up and vice versa. That's about as simple as it can get when trying to figure out what moves any market.

 

Things sound very simple when you're making money I guess. :cry:

[AbeSmith 10]

Simple. Trader psychology and supply vs demand

 

Please refer to my reply to Brownsfan. :cry:

[Guest cooter]

The YM is a index future whose price is totally calculated by supply and demand, the buying and selling of futures.

 

Yes, and no.

 

Because the YM (and DJ and DD) futures are cash-settled at the contract expiration based on the value of the actual DJIA index, it manages to keep in lock step with the Dow.

 

More info here:

 

http://www.cbot.com/cbot/pub/cont_detail/1,3206,1556+8709,00.html

 

There was a legal battle many years ago when the CBOT wanted to use the Dow index as a basis for a futures contract, but the Dow Jones Co. would not give its consent. So another index was developed that was said to mirror the movements of the Dow - since the CBOT could not use the actual Dow at that time as a benchmark. It was known as the MMI - Major Market Index, and based upon 20 of the 30 stocks in the Dow index.

 

In 1997, Dow Jones and CBOT agreed to issue a futures contract based upon the DJIA - this replaced the MMI futures contract.

 

 

[notouch 10]

I think it's a bit more complex than some people here are trying to present. There is a fair value for YM based on not only the DJIA but also dividends and interest. That's why the further from expiry, the bigger the gap between YM and DJIA. Once the future has expired it settles at the DJIA cash price. YM never diverges far from fair value because arbitrageurs step in and move it back to fair value.

[Nick1984 10]

This is off topic don't want to hijack the thread but: Cooter your avatar is starting to freak me out! lol That damn smiling penguin is stalking my IP!

[Guest cooter]

We know where your stops are resting too, Nick!!!

 

:lol:

 

Actually I put it on there just to keep people HONEST and remind them that they are not as anonymous as they think they are, or as they would like to be, when on the Internet.

[Nick1984 10]

omg noooo my stops! lol

 

Thats it I'm using a phone broker now! hehe.

 

Thats very true Cooter. Despite all the most fancy firewalls we can still be tracked! :o I should go delete my history before my missus finds me! jk heheh