Closing the Gap - Futures Edition

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Pairs Trading Equity Markets

Closing the Gap - Futures Edition

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Historically, equity index futures behave similarly in terms of direction. However, there are times when E-Mini S&P, Nasdaq, Dow, and Russell deviate in terms of relative strength and weakness. In this segment, Pete examines two of the most popular equity pairs, /ES-/NQ and /ES - /YM.

From there, he walks through the pros and cons of setting up pairs trades in the following ways:

  • futures vs. futures
  • futures vs. options
  • options vs. options

Based on recent price behavior and implied volatility, find out which method Pete chooses to approach a setup in these equity index pairs.

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