Predicting the S&P 500 Closing Price (Early) July 2012 Edition

Once again I dropped the ball and neglected to give you folks a post on option contract divined predictions over the next few months (and years). Operating from the school of better late than never, I’ve gone numbers as of last Friday, 6/29/2012, when the S&P 500 closed at 1362.16. I neglected it right on into July, from the publishing date – but I’ll attempt to get July numbers at the proper time (options expiration day is on the 20th).

Predicting the S&P 500 Closing Price From Contract Trading Prices

Remember, this method of predicting closing prices uses the currently trading price of put and call contracts at various dates in the future to derive what the expected closing price will be at a certain date. All samples are tuned to fall into a 75% confidence range (12.5% of the time we’d expect to close above and 12.5% below), and only contracts which account for more than .5% of the daily volume (and have .015% or greater open interest) are counted in our model.

As you can see, there’s a bit of a hitch in options pricing on the December 2014 contracts right now – perhaps the more risky among you readers might arbitrage the puts and the calls and bring them back into line? The model appreciates your help, and I’m sure the firms appreciate your money.

Political Calculations

It’s coming upon that time where predictions – especially those which relate to dates right around November – start to become particularly interesting. For what it’s worth, call contracts are pricing in a slight bump after November, while put contracts signal a slight decline. Neither is very optimistic – as you can see from the table.

	07/20/12	08/17/12	09/21/12	10/19/12	12/21/12	01/18/13	03/15/13	06/21/13	12/20/13	01/17/14	12/19/14
Put High	1360	1368.44	1361.21	1365	1345	1355	1360	1408.59	1391.4	1938.97	1210.71
Put Med	1343.4	1327.82	1311.56	1302.08	1240	1240.4	1260	1248.27	1239.74	1251.38	1062.07
Put Low	1280	1238	1210	1190.62	1100.45	1120.07	1100	1134.2	905.54	1095	840.9
Call High	1378.33	1399.11	1420	1417.65	1450	1425	1500	1431.67	1535.86	1395	1561.15
Call Med	1360	1352.02	1362.31	1358.52	1380	1361.89	1400	1378.32	1354.89	1290.09	1347.17
Call Low	1333.38	1311.46	1320	1318.67	1300.39	1301.85	1331.35	1290.37	1244.1	1205	1196.83

Take that for what you will – but a flat market through the end of October – with 1417.65 the most optimistic (75% top) closing price predicted, in this case on the call side, it will have interesting effects on the Presidential (and sub-office) races.

Don’t hold your breath everyone, the most optimistic reading I can give is we’re probably in for a choppy market!

And links to our previous prediction articles (check our work!):

What do you think about the predictions for S&P closing prices in the future? How do you think various types of markets affect President Obama? Mitt Romney? In a flat market, who do you think wins the presidency?

If you enjoyed this post, let others know!

http://twitter.com/familymoneyblog John Preston

I don’t see markets making a major improvement for either candidate. I think certain industries stand to benefit/lose depending on which one you choose, but ultimately I think it’s a zero sum game.
- http://www.dqydj.net/ PK
  
  I can see a choppy market not going up much before November hurting the incumbent (and, likewise, a massive downturn). Flip it around and have a massive market rally or even just a slight uptrend? I’d put a check in the Obama column.
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