Hi all, please forgive yet another inane question.
I am working on a strategy based on intraday changes in the XJO/SPI index that backtests well as far as the index changes themselves are concerned. Now how monetize it??!
I figure the way to try and implement this would be through SPI CFDs (I am with IB and they offer DMA SPI CFDs). [For some reason the strategy doesn't work as well with STW, so I don't want to go that route.]
I don't get the pricing of the CFD. I would think the bid/ask would straddle the index. If you think the index will fall, you sell at the bid, which is slightly below the index, assuming that you can buy back when the ask falls even lower than this later on.
However, the bid and ask are often on the same side of the index (both IB's and the native index). Does this mean that some of the future index movement is already factored in to the CFD price? So predicting the intraday index movement is not sufficient for a profitable CFD strategy??
If so, the question still remains as to why the index would lag the current market price? Has the CFD market taken a general direction before the SPI futures market?
I could sort this out myself if historical data were available for the CFD prices, to compare with the SPI index, but IB does not provide this.
Any enlightenment is massively appreciated...