Hedging ES with MES

[tiddlywinks]

Real time example a few mins ago . Es was running . I shorted 3 at 75. It ran to 77.25 . I would have been much better off with 10 at 75,76 and 77. I covered at 71 . I would have had a $150 better entry with the mes than es . Thats $150 vs an $8 in commissions savings with the es. What a better deal? And thats a lame example as many times when we run you can scale every 2 pts

And the thread title and initial posts are about hedging.

Your "real-time example" which is merely a scale-in relates to hedging exactly how?

 

[Overnight]

Hi guys,

If I hedge 1 ES with 10 MES,
Can I get margin call or issues with my broker ?

@AMP_Global

Let's say I have a 10K account,
I am down 10K ES wise but up 10K with MES.

What happens ?

Thanks

To answer your question...There is no intra spread margin discount between micros and minis. You are on the hook for effectively 2 ES contracts, so...25.5K or so required in your account.

That is because the initial margin requirement for ES is $13,200. Technically, you could not even initiate a single ES on a 10K account.

So assuming you had, say, $30K in your account, then no, if your broker follows the standard CME exchange requirements, having 1 ES long vs. 10 MES short (or vice versa) would not violate anything, since you are netting zero on their movements.

 

[hafez50]

And the thread title and initial posts are about hedging.

Your "real-time example" which is merely a scale-in relates to hedging exactly how?

Somebody brought up why the es is better than the mes because commissions are higher .Hedging the same instrument basically doesn't work. Its a zero sum game

 

[_eug_]

I know a guy who will hold ES swing trades in the direction of a bigger move but then take out MES for the counter trend impulse moves to profit on those as well and to hedge the position in case the trend reverses. I've seen him go as big as 700 mes contracts against his ES position.

 

[Laissez Faire]

Problem is I am often too early in my entries.
And most of the time the market revert at least to my entry.

I think this is what you needs to solve - not hedging.

ES generally isn't a breakout instrument and pretty much always retraces. Try to get in on retraces and not on breakouts or in the middle of moves/trading ranges.

Practice watching a move and accepting that you missed it. Resist the urge to enter after price already went 5-10 points - because that's the time when the retrace usually comes.

 

[Laissez Faire]

I know a guy who will hold ES swing trades in the direction of a bigger move but then take out MES for the counter trend impulse moves to profit on those as well and to hedge the position in case the trend reverses. I've seen him go as big as 700 mes contracts against his ES position.

Considering the commission structure on MES vs ES - wouldn't it make more sense to swing trade MES and intraday trade ES?

It depens on the trade frequency of course, but you really quickly rack up commissions when scalping the MES with a high trading frequency.

But I do like the idea. I've been thinking about doing something similar, but would possibly do it with the same instrument and two different accounts. 1 strategy which goes for the larger intraday swings, Open to Close, and 1 strategy for scalping smaller moves.

 

[virtusa]

No, since one would wash out the other. But what's the point? Just get out when you can.

BTW you pay more commish for MES. So 10 MES is much more than 1 ES.

On his 10K profit/loss it will make a difference of less than $10 (calculated at the commission rate I pay). That's how "much" it will cost him.

A 10K loss on 1 ES? I don't know anybroker that will accept that, unless you don't use margin. 10K means a loss of 200 points. Maintenance margin????

 

[virtusa]

Problem is I am often too early in my entries.
And most of the time the market revert at least to my entry.

Before entering just run around the block, and enter then.

 

[virtusa]

98% of the time one can get a much much better avg price on the mes than the es . For a guy with an account under $30k the mes is a much better contract to trade .

Can also be better depending on how you trade. If you are compounding, MES generates more profits as you can faster grow your size. The extra growth is much bigger than the more expensive commission you pay.

 

[CannonTrading_Ilan]

I asked my fellow broker Joe Easton on his take:

My understanding is 10 MES vs 1 ES is a viable spread recognized by the exchange. The margin is $0 according to our margin calculator on E-Futures. When trading futures you want to trade less and hold for longer. This allows the market and leverage to work for you, while not allowing the commissions and choppiness to sabotage you. Often trends last 2-3 days and an excellent entry is imperative to hold through the retraces. If you have an excellent entry and do not have the initial margin... using the micros to offset your risk through the close is a great way to keep the ES entry price multiple days. If you do have the margin and there has been a significant move in your direction, you can hedge some of the profits using micro lots at points you expect counter trend move