What are the pros and cons of trading the Q's vs NQ/other?
From a technical/execution/whatever viewpoint.
Thanks.
From a technical/execution/whatever viewpoint.
Thanks.
Straight QQQ vs Mini/other
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The leverage of NQ is immense, which is extremely risky, especially if you're a trader with a small account. Also, that leverage changes dramatically after 3:50pm, which has to keep you alert.
If you happen to have less than $25,000 in your account, the QQQ will be limited to 3 daytrades within any consecutive 5 days, and your leverage threshold is 2:1.
Midway between the two is your best bet: the QQQ Single Stock Futures. You get 5:1 margin, day or night, and you can trade them as frequently as you wish without the daytrade restrictions.
If you happen to have less than $25,000 in your account, the QQQ will be limited to 3 daytrades within any consecutive 5 days, and your leverage threshold is 2:1.
Midway between the two is your best bet: the QQQ Single Stock Futures. You get 5:1 margin, day or night, and you can trade them as frequently as you wish without the daytrade restrictions.
Ok, thanks. Other than that though, I think the rest of my comparisons of NQ and QQQ and SSF are generally true regardless of broker.
Lower volume is the biggest concern I think, the bid/ask spreads on SSF are going to be wider usually than on the QQQ stock. But that's probably made up for by the 5:1 margin and the no PDT restrictions.
Also, on IB at least, if you are market neutral with the SSF by buying a contract with one expiration month while selling a contract with a different expiration, the margin jumps to 20:1.
That means that with QQQ at $24.50, you could be market neutral with two contracts for total maintenance of $245. This may seem pointless, but I believe it can be a component of a useful strategy. Perhaps even more so with other SSF such as QLGC, KLAC, or NVLS which have wider daily movements than the QQQ.
I haven't tried it yet, but it's definitely what I'm working on figuring out.
Also, on IB at least, if you are market neutral with the SSF by buying a contract with one expiration month while selling a contract with a different expiration, the margin jumps to 20:1.
That means that with QQQ at $24.50, you could be market neutral with two contracts for total maintenance of $245. This may seem pointless, but I believe it can be a component of a useful strategy. Perhaps even more so with other SSF such as QLGC, KLAC, or NVLS which have wider daily movements than the QQQ.
I haven't tried it yet, but it's definitely what I'm working on figuring out.
Magna
Administrator
That really should read potential leverage, since you're obviously not required to utilize it. A good, safe, rule-of-thumb is to trade 1 contract for every $10K in your account (at current value that's about 2:1 margin, same as normal stock trading). Of course if your account is smaller, or you simply want to trade more contracts, there will be a temptation and your risk/reward increases as you keep leveraging. But if you're disciplined in your use of margin the NQ emini is no riskier than trading stocks.
The potential leverage with NQ is immense, and is extremely risky if utilized, especially by someone with a smaller account.
Some people see the maintenance requirements on NQ of approximately $2,000 per contract, and are tempted to jump into trading it without fully realizing that its actual value is $20,000. No harm in pointing this out for their benefit before they jump in like that.
Some people see the maintenance requirements on NQ of approximately $2,000 per contract, and are tempted to jump into trading it without fully realizing that its actual value is $20,000. No harm in pointing this out for their benefit before they jump in like that.