Say No To Thin E-mini Spread

I think we all like the idea of lower costs. But for traders like me who make money off moves what this means is more levels to go through. Takes more time for the asset to move. Look at stocks. To move a buck it needs to move through 100 levels now, compared to 16 before. And you get these guys scapling for every damn cent when I want to get 15 cents. Look at the emini. I want a couple of points, not 2/10 of a point. ANd the addition of liquidity is huge from the spread.

Is .25 the best spread?? That's tough to say. I did talk to a couple of people in Chicago and the number of arbs is big. We have a ton of liquidity because of them. Is .10 better?? With the emini so huge as it is, to fool around with it doesn't seem right.... I just wish stocks went to .05 spreads :D
 
Quote from Tea:



S&P pit traders are making in excess of $500,000 per year with a .10 tick in the pit.

Don't worry about there being liquidity providers if the Emini trades in a .10 tick.
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Yeah but that's about 10% of them.

The turnover with pit traders is the same as other trading areas. Just the top survive. Guess where a lot of liquidity /money comes from. ?

If you think 90% of pit traders make that much,

Than why aren't you doing it too?
 
Quote from canuck:

I think we all like the idea of lower costs. But for traders like me who make money off moves what this means is more levels to go through. Takes more time for the asset to move. Look at stocks. To move a buck it needs to move through 100 levels now, compared to 16 before. And you get these guys scapling for every damn cent when I want to get 15 cents. Look at the emini. I want a couple of points, not 2/10 of a point. ANd the addition of liquidity is huge from the spread.

Is .25 the best spread?? That's tough to say. I did talk to a couple of people in Chicago and the number of arbs is big. We have a ton of liquidity because of them. Is .10 better?? With the emini so huge as it is, to fool around with it doesn't seem right.... I just wish stocks went to .05 spreads :D
More...

I'm not so sure that it is the number of levels that price has to move through that stops a move - rather I think it is the intensity of the buying and selling pressure.

If anything, if support/resistance is spread out over more levels it should be easier to go through instead of hitting fewer levels where S/R is bunched up.

The problem today for daytraders is that buying and selling pressure is weak. That has more to do with being at the bottom of a long bear market where the average participant is standing aside.
 
Why not the opposite?

Let's raise the minimum spread to .35-.50

A lot of traders who trade the e-mini are daytraders Not long term investors. They don't do market orders of buying the ask and selling the bid. Daytraders need volatility to profit.

It's 50 times easier to trade stocks priced at 100 than stocks priced a 5 due to the volatility. The spreads on 100 stocks though are much wider due to the risk. Penny spreads mean much less volatility. Less volatility means less traders trading it and therefore less liquidity. (remember just the top % make money trading so there are less opportunites to make money from traders)

I imagine arbitrage accounts for easily 30% or more of the emini volume. Just as Program trading does for the NYSE. Take away the opportunity for arb players and you take away liquidity. What is great about arb guys is they are selling when market is going up and buying while it is going down. You want them around so you have somebody to trade against. (they lose on one side of each trade usually which you can profit from )

Robert
 
it's clear people are divided on this because of their trading style. the scalpers like the spreads, because this is how they trade. the longer term folks want to just get in/out when they want to, without being raped by some huge spread.

so, i can admit i'm biased here....but so are the rest of you....
 
One problem is futures lead stocks
due to arbitrage


You can't front run a large stock purchase with a stock purchase but you can buy futures beforehand.....

Let's not make the futures less volatile...not the best idea for traders.
 
Quote from rtharp:



Yeah but that's about 10% of them.

The turnover with pit traders is the same as other trading areas. Just the top survive. Guess where a lot of liquidity /money comes from. ?

If you think 90% of pit traders make that much,

Than why aren't you doing it too?
More...

I used to do business with one of the larger firms that backed pit traders in Chicago. They told me that the average Gross Profit of the hundred + traders that they backed was about $540,000. The traders take was between 50% to 70% of that or so. This represents a good cross section of the pit traders as the bigger traders don't need to be backed, have their own funds and own their own membership.

So its not just 10% as you stated.

Why don't I trade in the pit? Pit trading requires a different skill set than e-trading. Its very physical and you have to be able to remember a lot of numbers in your head. I can't remember any numbers. I trade visually, spotting patterns, entering, exiting.

Life is too short to do things you are not suited for or would not enjoy.
 
Quote from Tea:




If you can save $7.50 per Emini S&P transaction in slippage due to a .10 tick increment vs. .25 - how would that be less urgent/important than saving $2.80 in CME fees?
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Tea have you really traded futures? If so I can't believe you wrote that. There is no slippage with the emini. There is no floor to contend with. You can join the bid just like anyone else. You know very well that the spread in futures is not a hidden commission the way it is in stocks with a specialist controlling the book or your broker trading against your order flow.

You can pay the spread or you can hold out and try to earn the spread. Lowering the tick size is not saving anyone anything. What you save when you buy with the smaller tick size is the same as what you lose when you sell.
 
If you are so hot a trade a product with a small tick, why aren't you trading the emini Dow futures? It has a $5 tick. How's the liquidity in that market?
 
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