ETFs killing futures

[JohnGreen]

kxvid's comment is exactly the problem. Most people think futures are INCREDIBLY RISKY.

The reality is that they are almost the same thing as the ETF, with piles more leverage if you want to use it (if you use no leverage, they are correlated about 97%+). They're really more flexible than the ETF's because you can choose to use whatever leverage level (up to the maximum)and they are quite simple to use.

Most futures brokers also offer software for automatic trading, fancy charting software and sophisticated stops and trading tools to deal with the risk level--it's not bulletproof, but it helps a lot.

 

[monty21]

ETFs linked to indices (i.e. SPY, DIA, QQQQ) have exceptionally high volumes, but other futures, like in commodities, are incredibly thin.

 

[new$]

Curious?

Say in crude/options, the door to get your price may be quick. Are elf’s responsive to quick moves or are they more for the long termer?

 

[buzzy2]

ETFs and futures are different products. ETFs are for investors, futures are for traders.
ETFs are low leverage, no rollover hassles, and the most popular retail platforms support them.
Futures allow greater leverage. They are not riskier, it's just that they allow more leverage so they require either more expertise or a bigger account to not get killed.
For traders, futures are infinitely superior for just one reason: much smaller gap risk. ETFs are closed all night, so if you're a leveraged short term trader you'd better pray nothing happens overnight. Futures are closed less than an hour on day weeks, and open earlier, on sunday afternoon.
Many ETFs traders got killed over the last few months thanks to Bernanke and Paulson government actions. Future traders could adjust their positions accordingly, ETF traders couldn't.

 

[monty21]

ETFs linked to indices (i.e. SPY, DIA, QQQQ) have exceptionally high volumes, but other futures, like ETFs in commodities, are incredibly thin.

Commodities are essentially why the futures market was created. The S&P 500 contract was just another good product for mutual fund managers. And the e-mini gave even more business from the gamblers/retail "speculators".

 

[operator]

Quote from local_crusher:

When, after a long time, I today looked over volume figures for Globex, the thing formerly known as CBoT and ETFs, I was shocked:

The black box hedge funds blew up and are not pushing futures volume anymore.

 

[JamesVU2000]

thats exactly whats going on and deleveraging going on through out the globe. crude volume is off 50 percent. All this should be a huge warning to anyone thinking the economy is taking off along with the stock market

 

[local_crusher]

Quote from operator:

The black box hedge funds blew up and are not pushing futures volume anymore.

I think there is more to it.
SPY volume has increased very constantly, from 2000 - 2009 by a factor of ~30.

Equity futures volumes increased by 1.5 - 2.5.

The fact you are mentioning reflects very well in Eurodollars, however.

 

[d138]

It's much easier to trade ETFs then futures. Unless CME lowers their fees it will keep loosing it's market share.

 

[Covert]

Quote from buzzy2:

ETFs and futures are different products. ETFs are for investors, futures are for traders.
ETFs are low leverage, no rollover hassles, and the most popular retail platforms support them.
Futures allow greater leverage. They are not riskier, it's just that they allow more leverage so they require either more expertise or a bigger account to not get killed.

not sure that's completely true anymore- with triple levered ETF's and max margin allowed by many brokers, you're pretty much right there in terms of leverage with the futures....
One point I'd like to explore is the tax treatment on ETF's vs. futures. There is a very favorable tax treatment that futures traders get(60-40 split). I'd imagine that all those ETF trades made are short term cap gains. Is this a fatal flaw in the ETF-futures comparison? I'd like to hear some experienced ETF traders weigh in on this.