464A CoMPLETE GuIdE To THE FuTuRES MARKET
spreads. Again, to trade these types of spreads as price ratios, the spreads would be implemented so 
the contract values of each side are approximately equal, a condition that will be achieved when the 
contract ratio between the indexes is equal to the inverse of the contract value ratio. 
 Figures   32.1    through   32.6    illustrate the contract value ratios for these six spread pairs during 
2002–2015. In some cases, such as the S&P 500/dow spread, the contract value ratio does not vary 
much. As can be seen in Figure   32.1  , the contract value ratio for this pair ranged by a factor of only 
about 1.2 from low to high over the entire period. For other index pairs, however, the contract value 
ratio ranged widely. For example, Figure   32.4    shows that during the same period, the high Nasdaq/
dow contract value ratio was nearly 2.5 times the low ratio. Since the contract ratio required to keep 
the trade neutral to equal percentage price changes in both markets is equal to the inverse of the 
prevailing contract value ratio, the appropriate contract ratio for these spreads can range widely over 
time. For example, for the aforementioned Nasdaq 100/dow ratio, a three-contract dow position 
would have been balanced by a seven-contract Nasdaq position when the contract value ratio was at 
its low versus only a three-contract position (rounding up) when the ratio was at its high.       
 Figures   32.7    through   32.12    illustrate the price ratios for the six stock index pairs during the same 
period, along with an overlay of one of the indexes to facilitate visually checking of the relationships 
between the index price ratio and the overall stock market direction. Note that the price ratios 
in Figures   32.7   through   32.12   are identical in pattern to the contract value ratios in Figures   32.1   
through   32.6  , which is a consequence of the contract value ratio being equal to the price ratio times 
a constant—the constant being equal to the ratio of the multipliers for the indexes.       
    FIGURE   32.1    Contract Value Ratio: S&P 500/dow E-Mini Futures