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What caused the large difference between ES price and S&P price?


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What caused the large difference between ES price and S&P price?

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  #1 (permalink)
Atlanta, Georgia
 
 
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Today on March 15th 2020 we had an event that I have not see in my short experience of trading and I was wondering if anyone had any explanation for it. When we came out of the regular hours circuit breaker and hit a low price of 2350 on the July contract of the ES that price was not correlated to the actual price of the s&p index by a full 50 points!

July contract ES price was 2350 and the actual index only hit 2401. I have not seen the ES lose correlation to the S&P to this degree, ever.

The reason that I caught it was because I had calculated the possibility of a 2nd breaker at the price of 2358, and so naturally when we hit 2350 on the ES I expected to see the 13% breaker tripped. So that is how I caught this.

Does anybody have any kind of explanation for this event?

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  #3 (permalink)
Legendary Market Wizard
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Rezy View Post
Today on March 15th 2020 we had an event that I have not see in my short experience of trading and I was wondering if anyone had any explanation for it. When we came out of the regular hours circuit breaker and hit a low price of 2350 on the July contract of the ES that price was not correlated to the actual price of the s&p index by a full 50 points!

July contract ES price was 2350 and the actual index only hit 2401. I have not seen the ES lose correlation to the S&P to this degree, ever.

The reason that I caught it was because I had calculated the possibility of a 2nd breaker at the price of 2358, and so naturally when we hit 2350 on the ES I expected to see the 13% breaker tripped. So that is how I caught this.

Does anybody have any kind of explanation for this event?

Without knowing the exact time this took place, my guess would be it is a circuit breaker issue. You could not trade in one or both of the markets. ES is always closely correlated with S&P price during active trading.

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  #4 (permalink)
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kevinkdog View Post
Without knowing the exact time this took place, my guess would be it is a circuit breaker issue. You could not trade in one or both of the markets. ES is always closely correlated with S&P price during active trading.

So take a look at the low of the ES today and compare it to the low of the S&P today. It doesn't require an exact time. The extreme distortion is clearly visible in the difference in the lows of the two.

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  #5 (permalink)
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Rezy View Post
So take a look at the low of the ES today and compare it to the low of the S&P today. It doesn't require an exact time. The extreme distortion is clearly visible in the difference in the lows of the two.

You can't tell how distorted it was from the lows alone. Would need to see the actual market data from both, right now ES is a very illiquid market, so its very possible that it traded that far away during the panic after the second halt released.

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  #6 (permalink)
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Rezy View Post
Today on March 15th 2020 we had an event that I have not see in my short experience of trading and I was wondering if anyone had any explanation for it. When we came out of the regular hours circuit breaker and hit a low price of 2350 on the July contract of the ES that price was not correlated to the actual price of the s&p index by a full 50 points!

July contract ES price was 2350 and the actual index only hit 2401. I have not seen the ES lose correlation to the S&P to this degree, ever.

The reason that I caught it was because I had calculated the possibility of a 2nd breaker at the price of 2358, and so naturally when we hit 2350 on the ES I expected to see the 13% breaker tripped. So that is how I caught this.

Does anybody have any kind of explanation for this event?

Didn't look closely at ES or any data really yesterday so my explanation is fuzzy here but from what I saw on my phone:

ES lead month hit limit down at 2567.25, so it is only allowed to uptick at 2567.50 and above.

ES price discovery continued so no one wanted to buy above 2567.50, at some point 10.8k+ contracts for offer were piled up at that level and limit down prevented any downtick to 2567.25. I think someone or multiple parties were keeping a huge hidden portion to their order too so it kept refreshing around 10.8k.

Likewise SPY opened at 4 AM in cash markets at around -7% down without the limit down. Yes there were some, but not a lot of, people buying ES at 2567.50 (-5%) even though SPY was at significant discount to that (-7%).

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  #7 (permalink)
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Like you said since it was just after the circuit breaker was off, its possible all the s&p components did not start trading yet and perhaps there could be a bit of a lag in computing the index price.

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April 14, 2020


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