Why should a pit trader get compensated half a point just for making a market? Pit traders in the S&P have a very simple modus operandii: make wide markets and race the paper. Oh, what skill ! Let's interview Borsellino on CNBC ! What market mavens. I just love it when Morgan Stanley or Refco starts bidding or offering for a few hundred, you pit locals race 'em, and they flip it around and jam it right up your rectums. In spades.
Say No To Thin E-mini Spread
- Thread starter estrader
- Start date
If the pit contract has a .10 tick increment and has a spread that varies according to market demand - then why can't the Emini have a tick increment of .10 and the spread will be whatever the market demands? What are you guys afraid of???
PS. there is no pit traded ES, its called the SP
I also think its hilarious that you think you are entitled to some kind of compensation to cover the risk "to a career ending trade".
Where is MY compensation to cover the risk to a career ending trade?
First off, you called me on the pit traded ES.
What your failing to recognize is that pit traders act as the market makers in futures trading. They aren't betting on direction as much as they are on volatility. The point of my posting wasn't to say the .10 tick in the emini is bad. My point was that regardless of the tick, there is still going to be a .20 or .30 spread in most situations. I'm not afraid of anything related to tick size in the mini. My thought was the current status probably benefits most smaller traders more than it hurts.
As far as the costs of trading? If your choosing to give up the bid/ask spread on your own, that's your choice. As far as the cost goes, most experienced traders buy the bid and sell at the ask. Your compensation from a career ending trade comes from the fact that you attempt to choose the most opportune and profitable times to enter the market, hopefully being successful.
Why does the S&P pit have the liquidity that the screen doesn't? Because the bigger locals will make a market 50-100 contracts up and down, not knowing why the seller is selling or the buyer is buying. Again, this goes with the market making mentality. If look to finance journals, you would know that the size of the bid/ask spread is related to the amount of information available to the underlying product. What does investment bank A or hedge fund B know that the local doesn't? Alot, and for this liquidity and price discovery, the successful locals are compensated on their risk.
Basic tenet of economics and finance, risk and reward go hand and hand.
What your failing to recognize is that pit traders act as the market makers in futures trading. They aren't betting on direction as much as they are on volatility. The point of my posting wasn't to say the .10 tick in the emini is bad. My point was that regardless of the tick, there is still going to be a .20 or .30 spread in most situations. I'm not afraid of anything related to tick size in the mini. My thought was the current status probably benefits most smaller traders more than it hurts.
As far as the costs of trading? If your choosing to give up the bid/ask spread on your own, that's your choice. As far as the cost goes, most experienced traders buy the bid and sell at the ask. Your compensation from a career ending trade comes from the fact that you attempt to choose the most opportune and profitable times to enter the market, hopefully being successful.
Why does the S&P pit have the liquidity that the screen doesn't? Because the bigger locals will make a market 50-100 contracts up and down, not knowing why the seller is selling or the buyer is buying. Again, this goes with the market making mentality. If look to finance journals, you would know that the size of the bid/ask spread is related to the amount of information available to the underlying product. What does investment bank A or hedge fund B know that the local doesn't? Alot, and for this liquidity and price discovery, the successful locals are compensated on their risk.
Basic tenet of economics and finance, risk and reward go hand and hand.
Additionally, you can't begin to compare the risk you take as an e-mini trader with the risk of a pit trader. E-mini's don't serve as price discovery. They emulate the SP. Pit dollar volume is so much larger than mini dollar volume. Mini traders don't scream and fight for their fills, they click their mouse. You trade with a nearly unlimited supply of information at your finger tips and your screen. Pit traders don't have that advantage. You want compensation for your risk? Trade the SP.
Huh?Quote from Tea:
Good entries, patient exits, strict discipline on stops, keep costs down, go both long and short - BUT ABOVE ALL, YOU GOTTA DO SIZE
Hmmmmm.......you sir are a walking, talking contradiction.
I suggest that you have a conversation with yourself and straighten this out
My costs are identical either way! This whole argument is tautologous to me. Since I am a profitable spoo trader [knock on wood] what incentive can you offer me to lower how fast I take money from the market? _That_ would be _increasing_ my costs, not reducing it!
But I simply still don't understand this whole argument. WHY DON"T YOU TRADE THE SPY OR THE QQQ? They are to the e-minis what the e-minis are to their big brother. They are kept in line with by the arbs and trade essentially one for one. If you have a winning method for one, transfering that method to the other is work, but nothing more than anything else in trading?
I have not thought about the consequences of the spread for the "consumer" as opposed to the professional trader. There is no question that the penny spreads have made it "cheaper" for the "investor" to enter and exit stocks. But IMHO, this has made _trading_ them for profit that much harder (probably exactly 1/8 harder than it was before for NYSE.) I suspect the same would be true of the e-minis. You would win your battle, but I suspect we would all lose the war.
Since it is mostly professional traders and institutions trading the spoo, what possible benefit does it provide the trader to reduce the size of the tick? I just don't get it?
You keep alluding to the big spoo having a .10c spread. I suppose that in order to make this argument valid, you should also mention that the size of the contract is much bigger, so that 1 handle is $250, not $50. I am not even sure if what is being suggested is _just_ making the spread smaller, and still keeping the contract size the same, so that each handle would still be about $50 or $62.50 - I definetly oppose that.
I suppose that I would have no problem with the spread reduction [I suspect that even this would be bad, but it might be a compromise], as long as the size of the e-mini contract would go up by the same ratio so that the value of a handle would go to like $100-$125. Now you would have your tighter spreads, but I would have my same profit per effort afforded - I think...
nitro