Hedging with ETFs vs. future?

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ilganzo

Assuming capital or leverage is no issue, what is the advantage of trading Futures (or mini-ES) vs. ETFs?

I trade Nasdaq and NYSE stocks under $80, each position size goes from 200 to 1000 shares. I keep 3 positions opened max. My average holding period is around 30 minutes, sometimes a couple of hours if the position works well.

There are situations where I am long stocks and I see the future trading at support with a potential for breakdown. My long positions are usually strong but maybe not strong enough to survive a 2/3 points market dip. To reduce my risk in those cases, I am thinking to hedge my long positions shorting SPYers or QQQQs. Any opinion?
 
Quote from ilganzo:

Assuming capital or leverage is no issue, what is the advantage of trading Futures (or mini-ES) vs. ETFs?

I trade Nasdaq and NYSE stocks under $80, each position size goes from 200 to 1000 shares. I keep 3 positions opened max. My average holding period is around 30 minutes, sometimes a couple of hours if the position works well.

There are situations where I am long stocks and I see the future trading at support with a potential for breakdown. My long positions are usually strong but maybe not strong enough to survive a 2/3 points market dip. To reduce my risk in those cases, I am thinking to hedge my long positions shorting SPYers or QQQQs. Any opinion?
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I would go with SPY, you save on comissions by trading less shares to get the same exposure, and you dont need to have a diff platform (unless yours supports multiple markets like this) open to hit the futs.
 
So as I understand it the only advantage to hedge with the future vs. the SPY would be the 60% long term tax rate (of course, it's all relative to the future P&L). SPY spread doesn't look like an issue anymore.
 
Quote from ilganzo:

So as I understand it the only advantage to hedge with the future vs. the SPY would be the 60% long term tax rate (of course, it's all relative to the future P&L). SPY spread doesn't look like an issue anymore.
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If anything SPY is a bit tighter than ES (although not on size).

The minimum ES fluctuation is the equivalent of 2.5 cents in SPY.
 
Quote from Pabst:

If anything SPY is a bit tighter than ES (although not on size).

The minimum ES fluctuation is the equivalent of 2.5 cents in SPY.
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Interesting, I actually thought the SPY was thicker than the ES.

So long term tax rate on 60% profits and leverage explain why most of the ET index trading discussions are about ES, YM and minis, I'm assuming.
 
spy trades on AMEX which is the silliest excuse for an exchange i know. in 2006 the trade through rule will be changed so it only applies to electronic markets, then it will be better.
 
Quote from trade4succes:

spy trades on AMEX which is the silliest excuse for an exchange i know. in 2006 the trade through rule will be changed so it only applies to electronic markets, then it will be better.
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ok. my translation: AMEX sucks, but in 2006 they will be forced to route orders to the the best markets.

I was checking SPY quotes today: ECNs are already providing a lot of liquidity at the best prices. Most of the fills were on the ECNs, some on NY and regionals.
 

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i have a hard time getting my orders to execute on any ecn when amex is providing a stale quote as the best price. but that may be because the compliance department at my firm is working too hard.

edit: in most cases it's not a problem, but when it is, then you are not happy..
 
Quote from ilganzo:

Interesting, I actually thought the SPY was thicker than the ES.

So long term tax rate on 60% profits and leverage explain why most of the ET index trading discussions are about ES, YM and minis, I'm assuming.
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SPY trades about 70,000,000 shares a day.

ES trades about 600,000 contracts per day.

Each ES contract is the dollar equivalent of 500 SPY.

So ES volume in notional terms is about 4-5 times more than SPY.
 
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