Greedy CME Raises Exchange Fees Again as of February 1st
- Thread starter schizo
- Start date
If you keep your size the same at 8000 lots then you would be trading $2billion in notional these days and paying $32,000 in fees vs $1billion in notional and $28,800 fees from the above example.
The extra notional you are trading would be having a massive impact on your trading PnL, your profits should be double for this year, you just don't realise it or you have not adjusted your stop size and profit target to take into account the wider bars that exist at every time frame now that the S&P has doubled in value.
The downside is that those doubling of profits would be coming at double the risk, so to keep your risk and profit the same you can halve the number of contracts you trade.
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A simpler way of looking at it.
Lets say you day trade 1000 shares at a time of TESLA and it trades at $50 a share. And you tend to average a 1 point stop and 2 point target.
TESLA doubles in one month to $100.
At this point, if you are trading off the same signals, you should probably be averaging a 2 point stop and 4 point target, and cutting your lot size to 500 shares instead of 1000. And so paying just half of the fees.
A year later tesla is trading at $500.
At this point you should definitely be using a much wider stop than 1 point, probably be using a 10 point stop and 20 point target if trading the same type of signals, your 1 point stop definitely wont work anymore for your signals, and you will get stopped out so often. And because you now use a 10 point stop you should also switch to 100 share sizes to keep the same risk, so you end up paying just 1/10th of the fees!!!
(Stock splits ruin the above scenario, if TSLA does a 10:1 split, you are back to trading 1000 lots again)
The same thing applies to stop stock indices except the double time is longer and so you don't notice it one year over the next.
But over 5/10/20 it becomes very noticeable which is what my original post illustrated. Im effectively paying 1/6th the fees for trading ES as i was paying 20 years ago and about one half of what i was paying 5 years ago.
Luckily ES has never done a stock split. CME created smaller new contracts instead ie. the Micros. A split could happen one day if the notional value keeps on rising like it has.
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My stops are based on volatility, which IMO are affected by sentiment, valuations, news, trading and then last notional value.
Yes thats true, but the baseline (long term average trend) volatility is highly correlated to the notional size.
Then shorter term things like higher VIX, News events etc add on top of the baseline.
ES and Volatility underneath (going back to July 2020) clearly showing it dropping as price/notional value is going up????
Low vol follows high vol follows low vol rinse repeat, all the while notional, over time, goes higher. Also vol, most of time spikes, on drops.
You need to compare like for like and using much longer correlation period than a few years.
It is just simple percentages really.
A 1% move is twice the number of points when the index has doubled.
Shorter term sentiment, VIX level, New events etc dictate what the percentage move will be. The underlying index value obviously dictates how many points that percentage is.
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Notional is determined by Price movement. Not the other way around.
I, like most, trade Price.
I'm done chasing this tail.
When the market crashes, CME is not going to reduce the rates.
But the great thing is when the stock market crashes the VIX goes up to 30/40/50+, So you get to trade even fewer lots and pay even less in fees, even though the index has fallen 30 to 50%.
25 years ago I used to worry about protracted bear markets, where the market goes down 30 to 50% and stays there and vol dries up. An L shape. Where the bottom of the L lasts several years. But those dont seem to ever happen for the US stock market. The Fed makes sure we always get V shaped recoveries, back to near all time highs within a few years. Of course we cant rule that out for the future.. always a chance the US could get something like what happened in Japan. A 20 year down trend. I guess we cant just give all the credit to the Fed, the tech sector in the US has kept on innovating as well...
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