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Delta One and ETF in particular
Posted: May 14th, 2014, 8:59 am
by proteus
As far as the definition suggests, "Delta one are derivatives that do not have optionality" and examples provided are futures, swaps and ETFs. Are there any common pricing methods for all Delta One family, and otherwise - why is that considered as a family.I also wonder regarding ETFs. Again, the definition tells that ETFs track indices such as S&P 500, and are traded on exchanges having all the features of the stock. I wonder though, what is the difference between the index S&P 500 and the ETF on this index. I had an impression that both can be traded - is that incorrect?
Delta One and ETF in particular
Posted: May 14th, 2014, 9:12 am
by daveangel
the common pricing method is that the price of a delta one is usually is value today - sorry if thats not what you want to hear. But the price of the S&P today is it's price today. However, the price of a 3m forward on the S&P (which is also "delta 1") is the spot price of the S&P plus interest less dividends.You cannot invest in the S&P directly. The S&P500 is an index which which measures the aggregated cap-weighted performance of the US large cap equities. You can invest in a fund which tracks the S&P (an ETF like SPY).
Delta One and ETF in particular
Posted: May 14th, 2014, 9:15 am
by EndOfTheWorld
The SPY is tracks the performance of the S&P 500 Total return. A rolling strategy using S&P futures would have a different performance than the ETF, depending on the funding cost
Delta One and ETF in particular
Posted: May 14th, 2014, 9:44 am
by proteus
daveangel do you mean that if I'd like to follows S&P 500 with my portfolio I can either buy stocks of 500 companies in the corresponding proportion, or simply invest in an ETF that follows S&P 500? That is, if there is an index without a corresponding ETF, I can't invest in this index without buying each single stock indexed there? Please, correct me if I'm wrong.
Delta One and ETF in particular
Posted: May 14th, 2014, 9:48 am
by daveangel
QuoteOriginally posted by: proteusdaveangel do you mean that if I'd like to follows S&P 500 with my portfolio I can either buy stocks of 500 companies in the corresponding proportion, or simply invest in an ETF that follows S&P 500? That is, if there is an index without a corresponding ETF, I can't invest in this index without buying each single stock indexed there? Please, correct me if I'm wrong.you are not wrong