How can I get fair QQQ price on Island?

B

bobdek

I have tried to trade QQQ in the past with a regular online broker through the Amex and was disappointed. Now I am with JPR Capital and am trying to trade QQQ on Island.

But I seem to have a very hard time getting a fair price. The "slippage" is more than I was expecting, and I can't figure out why.

For instance, lets say I buy QQQ at 11 AM and sell it at noon. If the underlying NDX index went up 0.50% in this time, I don't make anything close to that. I'm making anywhere from 0.20% to 0.40%. Why is this???

Even if I buy on the ask and sell on the bid, and basically forfeit the spread, that doesn't account for such a huge difference. The spread is only 3 to 4 cents on a $48 stock, that should be less than 0.10%. So why is it that I often seem to lsoe a lot more than the 0.10% accounted for by the spread.

I realize I could probably get better pricing by enterng a bid and waiting for the market to fall enough so that the trade gets executed, and sell in a similar fashion. But if I do that I might miss the trade altogether if the price keeps moving away from my entry point. And I do not want to chase the price as it keeps going upward.

I am willing to lose the 3 or 4 cents spread of about 0.10% on my trade if I can get in exactly when I want and out when I want. And I am not trying to chase momentum, I am willing to buy the QQQ as it drifts gradually lower. But I cannot afford to give away 0.20% or 0.30% slippage on the trade in addition to the broker commissions.

Does anyone have any advice here? How can I buy 2000 shares of QQQ at exactly 11 AM, sell them at exactly 12 noon, and not get severely burned on the executed prices? Is there something I really need to know here?












 
I am really surprised by your experience.

The relationship between QQQ and NDX is fixed and only a little spread slippage is expected.
If in realtime you get the quotes of QQQ and NDX this relationship is close to constant throughout the day.

Using Island is the best way to get the right price. Island is not always the best price on QQQ though, but better prices [ie on AMEX] will never be filled anyway. At least Island will get you a fill.
Liquidity is good too, so if you use a limit order you will be fine.

The only thing to remember is to calculate the fair price of NDX and QQQ precisely at the same moment. The volatility is important enough that 0.2% comes by very quickly on QQQ.
Also, you should realize that QQQ follows more the naz futures than the NDX. Because Naz 100 is calculated and lags the market a bit [not much, but that's extra hidden slippage].

So unless you can check precisely the quotes in realtime for both QQQ and NDX and show a big difference in price the same few seconds, it is hard to understand what happened to you.

Unless you actively check these prices in realtime, imo you should not attempt to buy QQQ for only one hour. This is not saying you can't daytrade it and keep it for a few seconds or minutes if you want. I do. But it is another a very intensive job.
For 1 hour trade without intensive price checking and calculation, the regular market noise is probably the slippage you experienced.

I hope I make sense here. Just trying to help.
vpiNeo
 
I think the problem is probably related to my comparing the Island QQQ prices I get to the NDX prices at the instant it gets filled. I guess the NDX ticker is a few seconds behind to start with, and it only updates itself every 15 seconds, so I have probably been comparing the fill price with the NDX price that was there about 20 seconds ago.

And in a fast moving market, that would probably explain why it seems like I am getting slippage anywhere from 0.10% to 0.30% on a round trip trade. If I miscalculate a bit at each end, that adds up very fast.

I suppose I could follow the nasdaq 100 future, but what is the symbol? I tried typing CME:NQ06M in as the symbol and got no reading so far. Any advice for what symbol to enter? I use realtick.

Also, that still doesn't exactly solve my problem. How can I get in when I want, buy 2000 shares, then get out an hour later when I want, and avoid any major slippage in price? Any advice? Is there any way to predict at all where the QQQ price will be 20 seconds from now with any degree of success? In other words, is there an ideal time to get in and get out in general, and basically try to make up for any amount lost on the spread if you have crossed the market to get in and out quickly?






 
Yes, if you use NDX in your calculation you may easily have 'virtual' slippage.

20 seconds is a long time and certainly can not be predicted [you want to predict a quote.. I wish I knew how to do that ! :) ]

But more to the point, you do have now an accurate fill with little slippage. It is only because you compare the price variation of NDX at 11:00 and 12:00 and QQQ's variation at these hours that you see a difference.
What you should compare is Naz futures price when you enter [or 11:00] and when you get out. You will see that QQQ's variation is within 0.01% or 0.02% max [the regular slippage].

I suggest you reconsider your strategy. Or at least consider you are using the wrong data for now, and therefore can't control your profits or losses.

In quote.com, the naz futures for september is named :
CME:NQ01U try something similar under realtick. the symbol finder should help you I guess [I don't have realtick].

vpiNeo
 
Just a suggestion; over time there is an historical ebb in the market at about 10;00ET and again about 14;40ET. Watch it for a couple weeks and you may find better entry points.
Of course you still have to be right overall
 
/NDZ1 Nasdaq 100 (Market Hours)
/NDT1 Nasdaq 100 (Evening Hours)
/NQT1 Nasdaq E-Mini (Market and Evening)

Minis are free, the other two are sixty bucks a month.

Bill


 
Wow, White ---- thanx for that tip. I was a bit skeptical, but looking over a year of S&P charts you are right on -----there's unquestionably a disproportionate number of outright lows or at least swing lows at those times, especially between 2:15 and 2:45 ET.
 
I gave you the December symbols by mistake.

Here are the september ones:

/NDU1 Nasdaq 100 (Market Hours)
/NDP1 Nasdaq 100 (Evening Hours)
/NQP1 Nasdaq E-Mini (Market and Evening)

Bill
 
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