Predicting S&P 500 Closing Prices - May, 2013

May 15th, 2013 by 
PK

If you've been around a while... you know all about this series. Approximately one entry per month where we look at the way puts and calls are trading on the ETF SPY (a S&P 500 ETF), and use those to divine the future based on the disparity between those prices and where the stock is trading today.  Today's entry is based on data as of the close on 5/15/2013.

Does This System Have Predictive Value?

I'm going to go with... probably not.  Still, if a failed experiment about market predictions missed to the low side so often, perhaps you can use this data to your advantage?  Hear me out - let's say that there is a trend here, and puts and calls tend to imply closing prices on the low side... that would mean you've got a chance there is underpricing for more optimistic trades.

Here's what we've got this month:

Closing prices for SPY implied by calls.

And for puts...

Closing prices for SPY implied by putsToo Hard to Read?

Don't worry, I've got you covered.  Here's the above data in chart form (multiple by 10 to normalize the the S&P):

2013-052013-062013-072013-082013-092013-122014-012014-032014-062014-122015-012015-12
Put High166166168167.021166.143160162166.113165.725170.188169.34177.5
Put Medium165.162163162.224162.192160152.5152.908156154.83161142.5160
Put Low162158152154154.09140.262131.172141.138134.73131.235126.22121.354
2013-052013-062013-072013-082013-092013-122014-012014-032014-062014-122015-012015-12
Call High168170171172.833172.75179170179.172175.964180.503190204.853
Call Medium166166166167.221167.103166.137165170164.091164.934163.72175
Call Low165163161.119164.768163.077160.231158.237162.5150.968141.28138155

Good Luck!

Well, I'll still be logging these predictions so I can eventually follow up on the predictions that I've derived from puts and calls... but I don't look at this experiment as a reliable one for predicting market closes.  Nope... like I said above, I'm looking at it as a potential exploitable.

Let me know what you think... or if you can think of a way to scale or factor this data to improve predictive value... or, maybe, to predict where you can make money off the inefficiencies!

      

PK

PK started DQYDJ in 2009 to research and discuss finance and investing and help answer financial questions. He's expanded DQYDJ to build visualizations, calculators, and interactive tools.

PK lives in New Hampshire with his wife, kids, and dog.

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