Is it worth watching NAZ futures if trading QQQ?

B

bobdek


I made a previous posting about trading QQQ on Island and a couple people have commented that QQQ does NOT follow the NDX index, in fact the QQQ price will actually move before the NDX does. They explained this due to the fact professional traders trading QQQ on Island will watch the Nasdaq futures and trade QQQ accordingly, thus moving the QQQ price before the same corresponding mopve happens in the NDX level.

I am NOT a professianal trader, but I would like to trade QQQ on Island from a home computer using a cable modem and a realtick interface . MY question is this:

Would I gain any advantage at all my subscribing to a Nasdaq futues feed? (the futures quotes cost extra)

As a non-professional, would I have any hope of noticing a movement in the Nasdaq futures and buying/selling QQQ on Island, and get a very slight price improvement? Or would the professionals already have acted on the same info and beaten me to the bunch my one second, and already moved the QQQ price enough on Island so that would be impossible for me to gain any advantage looking at Nasdaq futures on a home computer. I suspect the latter is true and that the pros have alerady moved before me, but I want to hear some more educated opinions than mine.

I am not trying to make money on momentum movement, I just am looking for a very slight price improvement to basically cover any spread I am paying on the deal.

But if there is no point in me watching the futures, I might was well just watch the Island book and see where the prices are moving. I have noticed that if a lot of Island bids are above the prices of the other exchanges like the ASE, the NDX will likely move upward on its next tick. The reverse is also true. I know that info doesn't help me because its already past history by a few seconds, but its interesting to know.

Anyway, what is your opinion? Is it worth it for a non-professional trader to bother looking at real time Nasdaq futures quotes to gain a slight price improvement on a QQQ trade on Island?

 
I think that if there is a 'sunstantial difference' between QQQ and Nasdaq 100, you will get arbitrage as they should move in tandem. The only drastic moves in QQQ's that I have seen are situations when traders are using ISLD to get out in panic and ISLD is 5 cents away from best bid/ask. Otherwise, it is my opinion that you should use features to trade QQQ's

Paul
 
me again, since I am familiar with this matter.
You must watch the futures if you want price improvement, I mean, not pay too much or too less etc..
NDX will ALWAYS be behind. therefore, there is not much of a discussion.

I think your concern is the price of the data feed. Several data providers will offer you the futures e-mini for free.
[in realtime] I know Quote.com does, eSignal, Mytrack/TDC/AIQ, and I guess others.
The other futures are $60 a month, but we are talking NQ and SP futures, these are free when you have a realtime data feed of course.

The only exception, meaning you don't have to pay anything, is livecharts, a java chart and quote from quote.com. for a limited time, and if you login each day at least once, will give you this data in real time.

http://www.livecharts.com/

[it is a great deal for those not actually paying for realtime data feed, since you can get nasdaq stocks and these indices and futures in realtime for zero cent].

Of course, pros will have all this from their realtime data vendor or broker. I am only answering your very specific request.

I should point out, although probably it is none of my business, but maybe that's a lot of trouble for a 5 or maybe 10 cents [if you hold QQQ longer, as I understand you will, that's not so important]. On the other hand, it is your strategy and trading. :) I am glad if I could help you with your question.

vpiNeo
 
A few questions/comments...


You are going to trade the Q's, but not for momentum trades. So, what exactly is your style? Are you going to be swing-trading? Do you plan on holding for 3 minutes, 3 hours, or 3 days?

<i>Would I gain any advantage at all my subscribing to a Nasdaq futues feed?</i>

<u>3 min</u>
YES!

<u>3 hour</u>
Eh...

<u>3 days</u>
No.

Here's a breakdown of how the market moves (imo). Maybe this will help you understand.

1. The center of the trading world is the S&P 500 futurs trading pit. Everything starts here. (I'm ignoring the bond pits since nobody here really watches those anyways)

2. The next most important are the Nas 100 futures. I believe this moves 50% on it's own and about 50% from what the S&P pit does (imo!).

<i>NOTE: I personally watch the T&S of both contracts.</i>

3. Next, just tenths of seconds later the correlated stocks (stocks in the indexes) start to move accordingly. [JNPR, CIEN...]

4. Now indexes that are calculated from these stock prices show their new reflected price. [NDX, S&P500...]


As you can see there are a few steps between the futures prices and the NDX prices. So, obviously if you want price improvement on QQQ's you need to watch the futures, not the NDX. Also, don't be scared of these "professionals" because they are just traders like the people you are talking to on these boards like myself.

Dustin
 

In response to some of the helpful comments to my original question:

1. I am looking to hold QQQ stock for somewhere between 10 minutes to an hour, depending on the situation.

2. I have identified what I think could potentially be a profitable trading opportunity on a regular basis, my biggest concern is basically that my cost of getting in and out of QQQ stock quickly when I want to. To be assured to getting in and out when I want, I have to buy on the ask and sell on the bid. My concern is that paying this spread will dramatically reduce any average return I might theoretically be able to generate. The problem is magnified the more shares I want to trade at once. Trading 100 shares of QQQ is easy, trading 2000 shares all at once on Island at a fair price is more difficult.

3. I am trying to find a way to slightly improve my results on each trade. That is why I was asking about using the NAZ futures to get slight price improvement on the trade. If I could use the futures to get only a 0.05% price improvement on both the entry and the exit (on average), this would basically eliminate any spread I would be paying on the trade. That is really what I am looking for, to use the futures to get slight price improvement on the trade and basically negate the effects of paying the spread to get in and out quickly.

4. Someone was commenting about the $60 cost of the futures quote feed, price is not my concern, I will gladly pay the extra $60 if it means getting price improvement.

5. I was checking the CME site and they directed me to the "Marketsound" site. These guys are offering a free audio broadcast of the NAZ and S&P futures, and all the sounds from the actual trading pit. I checked out the audio and it was interesting, I don't know how to interpret it, but could this audio broadcast be helpful to me in getting QQQ price improvement on Island?

6. The comments above sememd to suggest the S&P futures were the most important, and were the ones to watch. I don't know much about futures, but it would seem to me that the Nasdaq futures would have more of a bearing on QQQ prices than S&P futures? How could S&P futures possibly be more important than the NAZ futures when we're talking about its effects on QQQ price?





 
Bob ----- Personally, I'd never remotely consider daytrading the QQQs without watching both ES/SP and NQ in real time. I trade only ES, and watch only ES/SP and NQ prices second by second. Dustin is talking about tick by tick movements in the futures, and often in fact ES/SP does lead both NQ and the entire market, though generally by just a second or two. Sometimes, though, especially if a volatile move is about to erupt, NQ leads ES/SP by a hair. I think it's crucial to watch both very closely. Obviously the Cubes track the NQ and not the ES, but in dealing with split-second decisions on trading timing for the Qs or anything else what's vital to know is that the two futures take turns in tandem to lead everything.
 
You should watch the Futures to trade the trust. If you don't you will be at a disadvantage.

The QQQ is the Nasdaq 100 trust. Which means it is concurrent with the NDX (the Nasdaq 100 Index). What we call the Nasdaq Futures are actually the Nasdaq 100 Futures(there is no futures contract for the Nasdaq Composite). So because arbitrage opportunities are quickly corrected...the index follows the futures. And the Trust is correlated with the Index. So since a futures feed will make you money it is a necessary expense.
 
I believe you can get the futures you need by using Quotetracker, with the Quote.com data.

Quotetracker is about as good a program as you'll ever see for free- register at quote.com and type your user/pass into quotetracker- you should be able to chart in realtime after that
 
While we are on this subject- can someone explain to me once and for all how the symbols work with the futures?

I know they are different for each quarter- etc etc

Is their a different "futures" for the S/P than the Nasdaq?

Can somebody list these symbols and explain when/how to use them?

I am interested in trading SPY in the same way as the QQQ mentioned here..
 
Futures symbols:

ES - E-Mini S&P
SP - Big (full contract) S&P
NQ - E-Mini Nasdaq 100
ND - Big (full contract) NASDAQ 100

quarterly symbols are:

H ---- March expiration
M ---- June expiration
U -----September expiration
Z ---- December expiration

Depending on your service, contract symbols are followed by either the quarterly letter and the last digit of the year, or by the last two digits of the year and then the quarterly letter. For instance: SP U1 or SP01U, NQ U1 or NQ01U. (Note the spacings on the first set of symbols between the symbol and the quarterly/year.)
 
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