So, intention and strategy define if it is legal or illegal to be long a contract in one account and short the very same contract (including same month) in another account?
Various uses of E MICRO futures!
- Thread starter traderjo
- Start date
This is really confusing to me. Are you saying a trader could have two accounts with two separate brokerages. Let us call the two accounts, account A and account B, for simplicity.
So a trader could be long 2 contracts in account A..lose access to routing in account A and go to account B and close out that 2 contract long position by shorting two contracts in account B? And then when access to account A is back up again the trader would find he is flat and has no 2 lot position in his account A?
In other words he closed his position in account A from account B? How in the world would that work? I can’t see it. Looks like he would still be long 2 contracts in account A and now short 2 contracts in account B.
MattZ
Sponsor
I answer to the best of my ability, but it seems that your intentions in both accounts are not to create wash trades but rather genuinely take on a position. One with short term horizon and one with long term.
This is my understanding. You can always call the exchange and get specific as per your situation.
Mmm that is an interesting explanation. I did not know that intention plays so much in whether one is deemed legal or illegal.
If this is true then I suppose, if push came to shove, and a trader was investigated they would then have to have “prove” as to what their intention was and not just “saying” my intention was thus and thus.
It still seems hard for me to grasp that intention makes it legal or illegal. Suppose a man’s wife is sick ..he has no insurance...can’t get any medical care for her so he decides to rob a bank. His intention is to only get some money for his wife’s medical need. He shows up to a teller gives her a note saying “this is a robbery hand over all your cash”. She presses a secret button alerting the assistant manager that she is being robbed. In the course of the robbery the bank assistant attacks the thief. The thief falls to the floor the assistant manager trips over the thief and falls himself hitting his head on the counter and dies from the blow. Can the the thief be indicted and found guilty of murder? If he claims his intention was only to rob the bank and not harm anyone. He argues he had no weapon..no guns..no knifes...nothing.
My original question/ post was not about same contract long and short using 2 accounts and it legality
It was about use of Mini ES contracts!
Example
Lets say a trader has a 1 LONG ES position which is + 5 points already but he/ she thinks that ES will travel further 10 points but before doing that will turn down 2 point
SO at the point where he is +5 on ES if he Initiates a SHORT 10 MES ( or 5 ) and lets assume he times the market correctly takes the 2 point profit on the MES and then rides the ES back to +10
All in same account
Could this be a simple use of MES?
Robert mentioned something about using Option to hedge in other direction but that involves time decay etc ,
It was about use of Mini ES contracts!
Example
Lets say a trader has a 1 LONG ES position which is + 5 points already but he/ she thinks that ES will travel further 10 points but before doing that will turn down 2 point
SO at the point where he is +5 on ES if he Initiates a SHORT 10 MES ( or 5 ) and lets assume he times the market correctly takes the 2 point profit on the MES and then rides the ES back to +10
All in same account
Could this be a simple use of MES?
Robert mentioned something about using Option to hedge in other direction but that involves time decay etc ,
Your math is off, but basically, yes, it would be legal to do that since they are two different instruments. I know, I called their market regulation department and asked them in beginning of May and they confirmed it.
The liquidity is there where it coulde probably work, but you are down to timing the market with outright legs.
Like the others have mentioned, it's kinda' just a rough way of doing it, and know that you WILL NOT get any margin discounts for that trick, as the CME has none in place yet for that scenario. So yer on the hook for 2 full ES contracts, monetarily-wise. 1 ES +10 MES = 2 ES on margin.
Last edited:
Could you correct the math then!
Double margin, yes correct, I am aware of that
Only reason to do is 1) if you are confident about timing this way and 2) do it in same account
Never mind the math bit, I read your + 5,-2, +10 thing wrong.
What you mean?
All I am simply saying is trader is +5 points and thinks it is going another +10 but in between may dip by few points and to take advantage of that temp downturn he uses 10 MES!
Unless you pinpoint what is wrong in the construct it is just a general opinion!
Never mind the math bit, I read your + 5,-2, +10 thing wrong.
Never mind the math bit.
Never mind.
Forget I mentioned it.
Claro?