Say No To Thin E-mini Spread

You are totally missing the variety of traders among this high volume.
Statistically, there is no chance that not a single one bids or asks on such as 0.1 0.2 0.3 .....0.9. Someone must be there in this enoumous traders group. And once it happens, arbs or whatever will follow the action, therefore 0.2-0.3 spreads is unlikely the case. Obvious.
 
Quote from jaming5002:




Why do you doubt that? The pit is the most liquid market and still maintains these spreads. NO SMART TRADER WILL RUIN THE SPREAD. Those that do narrow the spread will be picked off and have short trading careers.

For Ex. lets say currently mini spread is as follows:

200 bid at even
250 bid at .25

250 bid at .50
100 bid at .75

Large order to sell 400 at .50. What happens? Bids at .25 disappear because they think the seller knows something.

Large order to sell at market. The .25's get hit and so the even's. Who's still in the game? Those who bought at even. Why? Not down as much. Some of the .25 buyers will want to try to scratch and sell at .25.

Natural tendency is to want compensation for your risk. This will maintain decent spreads. Those who want to stick their neck out to far will be done trading shortly. The scalpers will always have the largest posted size and they won't ruin the spread. This is what puts food on their table. Enough arguing. I'm done.

In Peace
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very true

A lot of scalping was ruined though when they had 100 lot guys running in front of them over and over again for a penny during slow times
 
Quote from kenokabe:

You are totally missing the variety of traders among this high volume.
Statistically, there is no chance that not a single one bids or asks on such as 0.1 0.2 0.3 .....0.9. Someone must be there in this enoumous traders group. And once it happens, arbs or whatever will follow the action, therefore 0.2-0.3 spreads is unlikely the case. Obvious.
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Statistically, high prob. of mini spreads reflecting SP spreads (both GLOBEX and PIT). Arb. conditions ensure it.

Never said .10 spreads wouldn't exist at all. Read my prior posts. Said volume will remain on larger spreads (.20-.40) and those improving the spread are likely to get hit and lifted til larger spreads prevail.

Scalpers provide liquidity to the market and won't make markets in .10 spread. Therefore, those that stick their necks out to improve the spread will get hit and lifted, while the market reverts back to a more profitable, market spread.


Anyone responding to this, please take a look at the Dow mini's. Have a one tick spread, but no one wants to buy/sell for 1 tick profit of $5, hence LOW LIQUIDITY.
 
Quote from jaming5002:



Statistically, high prob. of mini spreads reflecting SP spreads (both GLOBEX and PIT). Arb. conditions ensure it.

Never said .10 spreads wouldn't exist at all. Read my prior posts. Said volume will remain on larger spreads (.20-.40) and those improving the spread are likely to get hit and lifted til larger spreads prevail.

Scalpers provide liquidity to the market and won't make markets in .10 spread. Therefore, those that stick their necks out to improve the spread will get hit and lifted, while the market reverts back to a more profitable, market spread.


Anyone responding to this, please take a look at the Dow mini's. Have a one tick spread, but no one wants to buy/sell for 1 tick profit of $5, hence LOW LIQUIDITY.
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First of all, you repeatedly mention miniDow, miniDow is simply not mature as eMini SP. Now eMini have achieved the needed liquidity so that fiddling with the minimum tick wouldn't do too much to lessen liquidity.

And now, if I miss somehting, let me know.
You say the large volume remain on 0.2-0.4. Is it like 900.02,@900.04 and 900.06?? What about 900.03, 900.05, 900.07?
My very simple question.
 
Quote from kenokabe:



First of all, you repeatedly mention miniDow, miniDow is simply not mature as eMini SP. Now eMini have achieved the needed liquidity so that fiddling with the minimum tick wouldn't do too much to lessen liquidity.

And now, if I miss somehting, let me know.
You say the large volume remain on 0.2-0.4. Is it like 900.02,@900.04 and 900.06?? What about 900.03, 900.05, 900.07?
My very simple question.
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I agree minidow is not mature. But has 95% correlation to SP. Why haven't some traders stepped over to catch the inefficiencies? No vol. That contract will never attract traders, spreads too narrow, volume to low.

Don't underestimate the importance of spread in scalping. It's critical. Take away a profitable spread, liquidity is drained away. Look at equities. MM's used to make 150-200K/year on the spread for avg. stocks. Now, 50-70K. Why? NO SPREAD.


No, SP spread doesn't occur at 900.2 bid/900.4 ask. Price occurs at all .10 tick levels. But there is typically a .20-.40 bid/ask spread, regardless of the price level. Hope that helps.
 
Quote from jaming5002:



I agree minidow is not mature. But has 95% correlation to SP. Why haven't some traders stepped over to catch the inefficiencies? No vol. That contract will never attract traders, spreads too narrow, volume to low.

Don't underestimate the importance of spread in scalping. It's critical. Take away a profitable spread, liquidity is drained away. Look at equities. MM's used to make 150-200K/year on the spread for avg. stocks. Now, 50-70K. Why? NO SPREAD.


No, SP spread doesn't occur at 900.2 bid/900.4 ask. Price occurs at all .10 tick levels. But there is typically a .20-.40 bid/ask spread, regardless of the price level. Hope that helps.
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Let's skip miniDow now.
If you are so right and sure about 'preserved spread' by arbs, what are you afraid of by reducing spread to 0.1??
In your theory, the 0.1 spread would not frequently happen even CME let the spread down. Then I say let it go.
 
Quote from kenokabe:



Let's skip miniDow now.
If you are so right and sure about 'preserved spread' by arbs, what are you afraid of by reducing spread to 0.1??
In your theory, the 0.1 spread would not frequently happen even CME let the spread down. Then I say let it go.
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In my first post, I said I'm not afraid of .10 tick in the mini at all. Don't trade the mini's and don't ever plan on it. But reducing the tick by .15 isn't going to turn a losing trader into a millionaire overnight which seems to be the belief of many here. Only thing I said was spread would prob. revert back to .20-.30. I've made my point, done commenting. If interested read prior posts. My thought was that it would prob. hurt retail traders more than help by reducing liquidity. Also, never said it was necessary to preserve spreads for arbs, just that they provide a fair amount of liquidity to the ES. A perfect example of how stuff gets lost and distorted on this thread.

In peace
 
Quote from jaming5002:

The pit is the most liquid market and still maintains these spreads. NO SMART TRADER WILL RUIN THE SPREAD. Those that do narrow the spread will be picked off and have short trading careers
edit note: and killed :D .

Natural tendency is to want compensation for your risk. This will maintain decent spreads. Those who want to stick their neck out to far will be done trading shortly.
In Peace
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Now this is the difference between the pit and the electronic market. In the pit, everyone can see what the other pit traders are doing. If you don't help to maintain an artificially wide spread, then you get shunned or get your knuckles broken by the Italy boys.

In the electronic market they don't know who is cutting the spread, so they won't know whose knuckles to break. So, knowing human nature, if tick is .10 and the market is liquid - the spread will be .10 and not .20+ as with the pit.

Jammin: since you are near the pit, I wonder if you could provide us with the names of the traders who are shunning other traders who try to narrow the spread. :D

This sounds a lot like what the Nasdaq market makers did in the 1980's. That collusion cost them over $1 billion dollars.

peace and love
 
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