Why is the e-mini dow so thinly traded?

T

triggertrader

i have read many posts about recommending the dow eminis. i hear that it has a low margin/volitility ratio, great point spread of 1 tick and $5 low value per tick. it all seems great on paper yet it terribly lags all of the other e-mini products. as of march 28th the open interest on the june emini dow is only 68,500 contracts and volume is 111606.
while the s&p emini has 1735358 open interest and mindboggling 911001 in volume. the nasdaq emini 331420 open interest with 193519. even the lowly russel 412873 open interest with great volume at 140752.
the mini dow went public in 2003 much like the other mini's yet it lags terribly even the less traded nasdaq and russel eminis.
i have traded the dow emini and have experienced slippage. this is indicitive of its thin open interest and volume.
my question is why hasnt this product caught on? this is after all a product of the dow, the most popular and oldest index in the history of the stock market yet even the least traded emini index has a whopping 5 fold more volume and open interest?
 
I think there's a few things that explain it:

- The most actively traded e-minis are the SP500 and Nasdaq because there were the first e-minis around since respectively 1997 and 1999. Before them, I think there were no electronic contacts in the US( there were in Europe ). ES has always been the most well-known and newbies directly go to it. Nasdaq has considerably lost volume in the past few years i think.

- Mini Russell is the most volatile e mini and thus permitting the most scalping... It's like 2 times the mini dow in volatility, and trading it is like a current trend( although it's hard to trade ).

- Mini dow is on the e-cbot platform and others are on globex. Globex is better, has fewer breakdowns...

- Mini Dow is the less volatile of all e minis ( with mini nasdaq now I think )

But it's OK. It's the cheapest, and you can find strategies on it. Slippage is most of the time of one tick RT( B/A spread of 1 tick )
 
Here is just a snippet of the article from thestreet.com (www.thestreet.com/_dm/newsanalysis/stockpickr/10347045.html)



_______________________
The Dow Jones Industrial Average, in many respects, is a useless index.


The Dow doesn't represent any particular cross-section of the U.S. economy. Nearly one-third of Dow components are "industrial" types of companies, although such firms make up less than one-sixth of the economy. Yet it's usually the index that media pundits use to represent the entire market.

And if the Dow should hit 20,000, hats will fly in the air as if this stepchild of the major indices has now graduated into adulthood.

With all this attention, and with the index consistently hitting new all-time highs over the past year, it's worth noting that not only are 18 of the 30 Dow components not hitting all-time highs, but they are actually down thus far in the 21st century. I don't believe we'll truly hit a peak in the Dow until most of these companies get back on track and are hitting all-time highs with the rest of their industrial cohorts.
_____________________________

How many money managers have their performance compared to how the Dow did? The S&P is the benchmark in the US.
 
The CBOT YM didn't used to allow stop limit orders which meant slippage on any breakout trade. I don't know if this is still true, but I did not trade it because of that.
 
Some of the advantages are

there are only 30 stocks which are fairly easy to follow

the index is not weighted by market cap,m etc as opposed to the others

the companies comprising the index are all blue chips and have high volume

To each his own of course.
 
YM is primarily a "retail" contract. Virtually no mutual funds or managers are bogied to the performance of the DJIA. In other words, to the institutions who ultimately drive volume, the Dow is a non-story.

YM has achieved a nice niche with small-medium sized day traders, a few intra-market spreaders and programs who'll facilitate trade out of fair value. That's it though.
 
You would think there would be a lot of arbitrage taking place with YM as there are only 30 stocks to buy and sell versus a few hundred with S and P.
 
Quote from Bearbelly:

You would think there would be a lot of arbitrage taking place with YM as there are only 30 stocks to buy and sell versus a few hundred with S and P.
More...

Arbitrage opportunities are predicated by the willingness of counter party participants to provide you with the liquidity needed to facilitate each of the legs.
 
Quote from triggertrader:

i have read many posts about recommending the dow eminis. i hear that it has a low margin/volitility ratio, great point spread of 1 tick and $5 low value per tick. it all seems great on paper yet it terribly lags all of the other e-mini products. as of march 28th the open interest on the june emini dow is only 68,500 contracts and volume is 111606.
while the s&p emini has 1735358 open interest and mindboggling 911001 in volume. the nasdaq emini 331420 open interest with 193519. even the lowly russel 412873 open interest with great volume at 140752.
the mini dow went public in 2003 much like the other mini's yet it lags terribly even the less traded nasdaq and russel eminis.
i have traded the dow emini and have experienced slippage. this is indicitive of its thin open interest and volume.
my question is why hasnt this product caught on? this is after all a product of the dow, the most popular and oldest index in the history of the stock market yet even the least traded emini index has a whopping 5 fold more volume and open interest?
More...


lol i remember when ppl complained that it only did 10k vol a day. Give it time.
 
Quote from Bearbelly:

You would think there would be a lot of arbitrage taking place with YM as there are only 30 stocks to buy and sell versus a few hundred with S and P.
More...

Ironically the reverse may be the case.

With the S&P 500, replicators often do not buy and sell all 500 stocks. Instead they might buy and sell a basket of stocks that is less than 500 but tracks the 500 closely enough within risk tolerances. This reduces friction costs(increases profits) and introduces a correlation element that excites replicators as a potential extra source of profits.

So, basket selection provides yet another dimension that stimulates competition.

With the Dow, it's just 30 names, far less room for creative replication. Just follow the receipe and mix the batter.
 
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