Each day's spread individually.
Some of the major turbulence in the spread occurs July 21 around 11:40am CST. The following is a closer look at the volatility of the relationship during this period. The left chart is the full hour, from 11:00am - 12:00pm CST, and the right chart is the 15-minute period, from 11:40am - 11:55am CST, marking the first of a series of significant downward pressures on the GLD/GC relationship.
Because the spread was quoted to the Gold contract (GC), this suggests the bid in the GC contract was under significant pressure, subsequently transferred and absorbed by low-latency cross-asset arbitrageurs who then hedged their long GC exposure by selling short the GLD vehicle (or managing a significant inventory of both assets in an attempt to stay "net flat" [pdf]).
2 comments:
ty for this j-will... so when we see the downward pressure of the GC contract- GC is bought and traded out on GLD or hard assets to remain net flat... is there enough market depth to make this arbitrage phenomenon scalable?
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Not without successful inventory management and the ability to flash limit orders as each tick changes. If you get hit/lifted on the bid/ask for one vehicle, there are a myriad of others than one can use to hedge that risk and trade the spread.
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