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Given Bid Ask Hang Seng Index Future Data, how can I determine whether the current index future price has gone up or down relative to the last price?

Bid       Ask
20,000    20,001
20,000    20,000
19,999    20,001
19,999    20,000

Since the index future is always in integer form, I was thinking of using "Mid Price" , i.e. Bid + trunc((Ask - Bid) / 2) in R and then comparing the mid price with its previous mid price in order to determine whether the index future price has gone up or down? Is this right approach ?

I would really appreciate any insights into this. Thanks.

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3 Answers 3

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if only bid ask data is given as indicated, your using of mid price is best and common option

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It's not, mid-price can change even if no trades are executed (such as when the liquidity dries up pr market makers change their prices). You can only compare previous trades to find it whether future price has gone up or not.

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You need to look at it for exactly what it is. The only information that you have is that the ask/bid prices went up/down. From this information you can calculate the mid prices. You do not have a perfect price estimate, and it is important understand this fact and deal with it.

Instead of computing only mid prices, I find it useful to compute bid and ask prices as well.

You will have 3 price streams to compute, and you can then evaluate each one of them separately as well as in composition:

  1. Mid
  2. Bid
  3. Ask

Using some kind of composition enables you to differentiate cases where only bid or ask changed values from cases where both changed values.

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