The same principles, yes, but not necessarily the same frequency of trading opportunities (because trading the S&P is like watching paint dry, compared with some instruments, and that matters to some of us). In other words, you chose a highly specific and unrepresentative example, as an example of the more general point you intended to ask about.
es vs. equally liquid instrument
- Thread starter icebiker
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The same principles, yes, but not necessarily the same frequency of trading opportunities (because trading the S&P is like watching paint dry, compared with some instruments, and that matters to some of us). In other words, you chose a highly specific and unrepresentative example, as an example of the more general point you intended to ask about.
I've traded both these things extensively just like you, no need to get testy. Let's go through them one by one.
* Sizing - can choose any position size. - True
* Lower trading costs - approx 40% less - First off commissions and exchange fees are generally going to add up to less with ES, obviously varies by broker. The bid/ask question has been widely litigated here and elsewhere and the consensus and my personal experience is that a limit order gets filled at exactly the same price with either instrument. If you have a strategy that requires market orders, then in some markets SPY might be better, otherwise they're the same in this respect. Not sure where the 40% less number came from, that seems rather arbitrary?
* Lower volatility, making it easier to stay with a trade. This is just absurd and completely incorrect. They both track the same index and are arb'd by HFT to the millisecond. I'd welcome you to show us all parallel charts where one has a "volatility spike" and the other doesn't, although you'd be much smarter to just get rich off that if it was true.
Longer time frame Pro's (swing/trend/positional)
* Pays dividends (for swing/trend/position traders) - Sorry but this is a pretty fundamental lack of understanding of futures. ES indeed doesn't pay a dividend, but it trades at a premium which reflects this. There's a reason ES only matches the S&P 500 on expiration day, that reason is dividends and the implied interest you save by the amount you have to put down to purchase the future vs the notional value. Bottom line there is no monetary advantage from dividends with SPY vs ES on any time frame.
* No carry costs - if you're holding longer term that is. If you're talking buying for 20 years in your IRA then obviously, you can't buy a futures contract 20 years out and there would be a roll cost if you kept rolling shorter term contracts. Not sure anyone would call that trading of any kind though. Of courses SPY has a fee as well, it's just very low.
* Trading around a core position using SPY gives you the lower tax rate as futures. You're going to have to explain yourself here as this makes no sense. Futures are treated as a 1256 contract and taxed at 60% long term and 40% short term. SPY isn't. My best guess as to what you're trying to say is that if you keep 60% of your SPY position through an entire year then you would pay the long-term rate on that? Again most of us wouldn't consider that trading, but sure, if you hold SPY for a year it will be taxed at the long-term rate.
Lower trading costs - approx 40% First off commissions and exchange fees are generally going to add up to less with ES
Lets take a comparison let's use IB, in this example you buy on the ask and sell on the bid which is typicall these days due to HFTs.
The ES tick is $12.50 - $25 round-trip + commission & exchange fees = $2.02 x 2 = $29.04
500 SPY shares = the ES
SPY tick = 0.01 cents x 500 = $5 - $10 round-trip + $2.50 commission x 2 = $15
ES round-trip = $29.04 - the SPY round-trip = $15, the SPY trading cost is 49% less than the ES.
i should get paid for educating the misinformed people that assume but never do any real fact based research. You are still wrong on the other SPY pro's I mentioned.
I will admitt that trading around a core position with SPY to get the same tax treatment is a bit subjective since this is a strategy used by more sophisticated traders.
ck is 0.01 cent
Lets take a comparison let's use IB, in this example you buy on the ask and sell on the bid which is typicall these days due to HFTs.
The ES tick is $12.50 - $25 round-trip + commission & exchange fees = $2.02 x 2 = $29.04
500 SPY shares = the ES
SPY tick = 0.01 cents x 500 = $5 - $10 round-trip + $2.50 commission x 2 = $15
ES round-trip = $29.04 - the SPY round-trip = $15, the SPY trading cost is 49% less than the ES.
i should get paid for educating the misinformed people that assume but never do any real fact based research. You are still wrong on the other SPY pro's I mentioned.
I will admitt that trading around a core position with SPY to get the same tax treatment is a bit subjective since this is a strategy used by more sophisticated traders.
ck is 0.01 cent
Not sure if you were trying to add a picture, you ended up with a bunch of blank space with "ck is 0.01 cent" at the bottom? I will admit that adding pictures is something done by more sophisticated users.
There's no point arguing about "transaction costs". If you assume that you only submit market orders, SPY is generally cheaper. If you submit limit orders it generally isn't. In either case the actual commissions and exchange fees are generally less for ES than SPY. Don't make a mountain out of a molehill on that one, there's nothing to argue.
I'm happy to talk about anything specific that's wrong with the rest of my replies, and I'll even manage to do it without being drippingly condescending like you. Seems only right if you accuse me of being a misinformed person who never does any fact based research that you at the very least need to address each issue that I so carefully delineated. Simply stating "You are still wrong" manages to be completely information free and isn't terribly helpful to anyone. Least of all me who would love to know if I actually am wrong so I can change my viewpoint. Unfortunately I can't do that, nor can anyone else, with the information you provided.
It does not matter what type of order you use, obviously you can use limit orders on SPY also. The ES tick is $12.50 and you eat a tick on your entry. The SPY tick is $5 (0.01x500). SPY is about half the trading cost not matter how much you may not want it to be. Math does not have opinions - just hard facts.
Futures costs more to play with since you are given huge leverage paying only 5% of what the person using SPY (500 shares) pays.
Futures costs more to play with since you are given huge leverage paying only 5% of what the person using SPY (500 shares) pays.
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If you assume you eat a tick on entry and exit, clearly your math is correct. Again, no need to get your panties in a wad my friend, settle down and let's learn from one another here.
Can you perhaps shed equal light on the rest of your comments, or is "You are still wrong" the best I'm gonna get on that?
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Good points , co magnum,but i dont believe all that;
mainly the intra -day part. You maybe right on intra-day part+ lower SPY vol part; but not sure that will help a beginner??
Another advantage of ES, its designed to trade;
when leverage is added to that, losses become bigger// beginners.I do put on most my non ES trades/investments in the day[reg hours] not sure i would call it intra -day.