Broker says Illegal to long 1es shot 1es in different account same time

ksonsinc · Jul 12, 2006

Well i tried to to go long and shot es ym based on price action
for 3 conservative days and i made $500 one day $459 one day
and $609 the 3 day with a $5K account
Now i am planning to go with a $10 account and do more contract using the same stradgey and also looking at es long es shot stradgey

Neodude · Jul 12, 2006

I think this can be considered illegal under the market manipulation regulations. If for example you sell from one account to your other you are in effect creating fake volume and gaming the market.

-Neo

gnome · Jul 12, 2006

I don't think it's either immoral nor illegal, just pointless. And brokers wouldn't want you to have both in the same account because one would offset the other. If you tried to keep both open at once, broker's computer would probably BONK!

gkishot · Jul 12, 2006

I would say it's legal and it's called spread. Maybe you want to consider deep in the money options as a nice alternative.

Neodude · Jul 12, 2006

Quote from gkishot:

I would say it's legal and it's called spread. Maybe you want to consider deep in the money options as a nice alternative.

You can't have a spread in a contract that has the same expiration date. Even in options you are not spreading the same contract, instead you buy and sell verticals or horizontals. In something like the ES you're limited to calender spreads.

-Neo

NCYankee · Jul 12, 2006

I can think of several strategies that can work by being both long/short at the same price and then closing the wrong side of the breakout and letting the other position ride.

This makes no sense - all you would be doing is burning a commission - if you waited until the point at which you decided one side was wrong THEN went either short or long as the case may be, you have done exactly the same thing but saved a commission.

It still all comes down to timing.

nkhoi · Jul 12, 2006

Quote from ksonsinc:

What is it Illegal to shot 1es and same time go long 1es in a different account
Is there some kind of advantage we have when we do that
Accourding to my stradgey Technique i think we have a edge and trading 1 ES long and 1 es shot we can average and find a right entry and exit
What do you,ll think

from O'Brien customer agreement

"Customer acknowledges that his/her separate accounts will not contain long positions in one account and offsetting short positions in another account unless such accounts are independently traded or unless one account is a Speculative Account and the other is a Hedge Account. In any event, Customer understands that positions in separate accounts cannot be transferred from one account to another account if such transfer would result in an offsetting transaction"

OpenEcry doesn't even mention anthing about 'offsetting position' in their online agreement.

look like it is ok to do it.

gkishot · Jul 12, 2006

Quote from Neodude:

You can't have a spread in a contract that has the same expiration date. Even in options you are not spreading the same contract, instead you buy and sell verticals or horizontals. In something like the ES you're limited to calender spreads.

-Neo

Why I cannot short and long the same contract with the same expiration date? Is it illegal? With options I can go long puts & calls with the same strike price and the same maturity and it will produce the same ( or about the same) P/L as with contracts. My point is that if one really wants to do it it can be done. On the other hand as far as margin on futures is concerned ( as opposed to options where there is no margin ) one can spead 2 different contracts with the same maturity( like ES & NQ). So is it illegal to do it with the same contracts?

Neodude · Jul 12, 2006

Options are a different animal from futures contracts. Going long and short at the same time in the same futures contract would be the same as buying a call and selling a call with same maturity and strike, this is different then buying a call and a put. The illegal part of the argument comes in because this can be used to create fake volume/liquidity and fake volume is a form of market manipulation. I'm not a compliance person, so I can't tell you if this is in fact illegal, however from what I remember when I was taking my liscencing exams this form of trading was prohibited. Best way to find out is to call the exchange where you are trading the product.

Quote from gkishot:

Why I cannot short and long the same contract with the same expiration date? Is it illegal? With options I can go long puts & calls with the same strike price and the same maturity and it will produce the same ( or about the same) P/L as with contracts. My point is that if one really wants to do it it can be done. On the other hand as far as margin on futures is concerned ( as opposed to options where there is no margin ) one can spread 2 different contracts with the same maturity( like ES & NQ). So is it illegal to do it with the same contracts?