Yes, I did that in Multicharts after some of the answers here were not very clear to me, and SPY and ESH7 moved about the same. So, for short term trading (seconds or minutes), SPY seems like a much better method for me, as the bid/ask spread for the E-Mini seems at least 2.5 times more expensive.
Trading SPY vs S&P Futures
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To open a futures account, one needs approx. $5,000, some brokers I have seen require $400 to 2,000 to trade one contract of ES. Now if we are going by what you outlay to do a trade of $113,000, some could do 282 contracts at $400 ES margin if their account had $113,000, so a one tick move would be $3,525 less approx. $4 each for commissions = 1,128, so you net like $8.50 a contract and you can buy ES on limits as well-no rebate though. but not all systems that work on pennies will work on quarters, always have to adapt, cause if some calculation ends at 2230.375, will you average up of down, whereas on pennies you not losing as much on half a cent.
Just to reemphasize what Robert said, the wider bid ask on the futures doesn't reflect what you can actually trade at. You can almost always get a limit instantly filled at a nickel off the true mid. So unless you have a strategy that requires market orders you get very comparable actual fills.
Think you can scale the strategy to a shorter timeframe/do more volume? If so, you can probably get a better fee tier and make money on that trade.
Yes, I can do larger trades and for shorter timeframes, but the main problem is still trying to beat the bid/ask spread. I have done live trading for many years (not using quant type strategies) but never used limit orders, so I need to experiment with them to see how much that will save me.
Yeah. But if the 282ct position moves 10 ticks against you, you're looking at a -$35,250 loss. Who can stomach that loss? Never leverage yourself to the maximum DT margin your cash in the account could handle, because it could go very badly.
So one could state that if one does not wish to use leverage (or it is not a deciding factor), and one has sufficient funds (let's say a 1M account) then there is not much of an advantage of one over the other?
Some points I can think of that may or may not influence the choice:
1) Futures can trade outside of regular trading hours, so it could be a good play if you are concerned about global macro events?
2) SPY ETFs held in inventory pay Dividends
3) Tax considerations?
Some points I can think of that may or may not influence the choice:
1) Futures can trade outside of regular trading hours, so it could be a good play if you are concerned about global macro events?
2) SPY ETFs held in inventory pay Dividends
3) Tax considerations?
$1M is sufficient to survive a 10-tic drawdown on ES with 282 contracts? Let's calculate it using IB's numbers, since they are quite popular 'round these parts.
IB's initial overnight margin on ES is $7588.43 per ct. At 282 contracts that's ~$447,900 required just to stay in. Now what happens if...
Wait a moment, just looked further into IB's margin structure. I now can make neither heads nor tails out of it. Forget it.
Juts go ahead and lose 32K on 282 contracts if you get a 10-tic drop. *shrugs*