Program Trading

Program trading is the purchase or sale of at least 15 different stocks with a total value of $1 million or more. Stock-index arbitrage is defined as the sale or purchase of derivatives such as stock-index futures, to profit from the price difference between the basket and the derivatives. Under Rule 80A, when the DJIA moves 50 points or more from the previous day's close,index arbitrage orders in stocks of the Standard & Poor's 500 are subject to a special tick test. Program traders are contrarians. They buy into weakness and sell into strength. Some of Wall Streets biggest names are the players in this game and you should not bet against them. They are among others: Merrill Lynch Bear Stearns, First Boston, Morgan Stanley, Deutsche Bank Sec, and Nomura. Be assured that these people know exactly what they are doing.