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Future and derivatives thoughts

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Derivative markets (spot euro and 6E, SPY and ES futures, etc.) are arbitraged by computers. Something has to move first, and a whole class of HFT strategies are built around this fact. When one gets just enough out of sync with the other, then buy and sell programs kick in to bring them back in line, capturing a small amount of the spread.

Derivative products actually move one another -- stocks in an ETF move the ETF, but trading in the ETF also effects trading in the underlying stocks. Same with spot currency and futures, though the OTC forex market is obviously much much larger than the futures market.

There are numerous classes of products which must be arb'd to keep things in line, and it happens all the time, every day. The Russell futures must be arb'd with the IWM ETF, which is arb'd with TNA, TZA, and a host of others, which then must be arb'd with 2000 small cap stocks. The speed of computers makes it all work pretty seamlessly.

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