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SP500 and SPY
Old 10-31-2008, 11:45 AM   #1
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SP500 and SPY

Anyone know why there is such a difference on a day to day basis between the SP500 and the tracking stock SPY?

SPY tracks the SP500 very closely over most time frames lasting longer than a day or two, but on an intraday basis its all over the place.

For example, as I post this the SP500 is +5.89 points or +0.62% but SPY is -0.17% for the day. Thats more than 3/4 of a percent difference. This happens alot and makes no sense to me.
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Old 10-31-2008, 11:49 AM   #2
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Teh only thing I could figure is that arbitrage has costs, especially at times like now when credit is tight and there is a lot of volatility.

Don't forget- these two trading items are only linked by arbitrage.

Ha
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Old 10-31-2008, 11:49 AM   #3
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Could it be that they're not running on the same time-line?
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Old 10-31-2008, 11:54 AM   #4
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Originally Posted by haha View Post
Teh only thing I could figure is that arbitrage has costs, especially at times like now when credit is tight and there is a lot of volatility.

Don't forget- these two trading items are only linked by arbitrage.

Ha
That might make sense except that there are just as many days that SPY does much better than the SP500, so its not like SPY is losing out to spreads or any type of trading costs.
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ETF Premium and Discounts
Old 10-31-2008, 11:54 AM   #5
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ETF Premium and Discounts

Every ETF such as SPY trades at a premium or discount to the NAV of the shares. SPDR S&P 500 ETF (SPY), SPTR Fund Detail | SSgA Funds - Fund Detail

Additionally, since ETF's trade on the American Exchange, there is a bid/ask difference in the price reflecting demand for the shares. In times of market excitement, this difference can be more substantial. The shares may also be traded on the NYSE, and there can be differences between what you might see on Yahoo finance, and what your broker might show.
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Old 10-31-2008, 11:55 AM   #6
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Could it be that they're not running on the same time-line?
They are both real time quotes. Is that what you meant?
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Old 10-31-2008, 12:00 PM   #7
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That might make sense except that there are just as many days that SPY does much better than the SP500, so its not like SPY is losing out to spreads or any type of trading costs.
This is just what I am saying. There is cost to arbitrage.The S&P cannot be traded- only futures, and an ETF such as SPY.
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Old 10-31-2008, 12:03 PM   #8
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Yes. But are you sure there isn't a delay in one relative to the other? The SP500 number I watch on various networks is always different at any given moment, sometimes even on the same screen showing two different numbers. I wouldn't worry about too much as long as the end of the day's numbers are equivalent.
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Old 10-31-2008, 12:04 PM   #9
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People can buy and sell SPY for whatever they want during the day. Especially if they don't compare it to the index while they are doing it. SPY will only match the index as long as someone is watching the spread between the two and tries to arbitrage any difference.

When there is a large difference throughout the day, SPY probably closed at a significant difference to the NAV the day before. You can find the NAV on Morningstar or Yahoo, though Yahoo seems to be a day behind every time I check an ETF.

The NAV is the real value, just like a mutual fund, but it is only calculated at the end of the day. The quoted price is just what the last guy paid for it.
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