Why trade ES if SPY is much cheaper?

Quote from austinp:

<i>"what have you been smoking? of course there is relevance to the spread. a retailer who always enters at market and sells at market, will save money on a tighter spread."</i>

It's been awhile, but apparently what I smoked wasn't nearly strong as yours.

Explain mathematically how exactly you "pay" the spread? A retailer who enters at market and exits for anything less than the exact, specific, extreme tick DID NOT pay the spread. The spread was absorbed thru price movement outside of the round-trip trade.

If you buy at ES 1400.00 or 1399.75 or 1398.50 and exit for +4pts profit at a targeted exit, trailed stop or any other reason, what did you accomplish? You captured a +4pt trade.

Congratulations, job well done... and the distance of spread meant absolutely nothing. It could have been $12.50 wide, $25.00 wide or $100.00 wide. What do you care? You picked off $200 from inside the swing regardless of all else.

A retailer who buys & sells at the market does not save squat... if they are doing anything other than trying to scalp for ticks, which is a just loser's fallacy game in eminis to begin with.

Enjoy your skunk, we've been dry over here for decades now :cool:
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Let's "prove" this in a very simple way.

Assume the market is at 1400.00 /1400.25

you decide to go long at market , you buy at 1400.25 , immediately you want to close your position at market , you will be filled at 1400.00 ; you start out with a loss of 0.25 = the spread
The market needs to move 1 tick higher to 1400.25/1400.50 to break even.

Clear ?
 
Quote from austinp:

<i>"The misinformation posted on this board by "experts"..."</i>

Which certainly leaves you out, in your present ET carnation and past.
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Anyone with more than 1000 posts should have figured out the above.

I am not an expert but I do understand basics about trading.

My past carnation ?! You suffer from paranoia ?
 
Quote from FT79:

Yesterday after the close I was bored and compared ES with SPY and if I look at the spread costs (buying on the Ask and immedialty selling on the Bid) and trading costs the SPY is much cheaper the ES. I have used IB for the fees

ES spread costs $12.50
ES RT $ 4.80
Total $17.30

To get the same exposure in SPY you have to trade 500 shares
SPY spread costs $ 5
SPY RT $ 5
Total $ 10

The difference is $ 7.30 per round turn / per contract. if you have 10 round turns a day you would save $ 73,-. Why should somebody trade ES or have I missed something?
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You've been given some thoughts on various things you may have missed. But here's another one:

Ever watched the SPY and the ES trade side by side? What you'll notice is that SPY can move around slightly while ES does nothing. To me that indicates that the spread in SPY is not really $.01. One trader might be paying several cents more than another while the ES quote has not changed.

If you were to make that SPY spread $.02 rather than $.01, your basic costs are the same.

I trade the ES. Better taxation. I can trade 24 hours if I wish. And at times I have held a position I wanted to get out of at night. Or wanted to put a position on at night. My commission is better than $4.80 at IB....volume gets you a better rate. And while I'm not that concerned about leverage, it is definitely superior in the ES.

OldTrader
 
<i>"you decide to go long at market , you buy at 1400.25 , immediately you want to close your position at market , you will be filled at 1400.00 ; you start out with a loss of 0.25 = the spread. The market needs to move 1 tick higher to 1400.25/1400.50 to break even. Clear?</i>

No, that part is not clear. First of all, why would someone want to immediately close out a position just opened? Secondly, how often would such a scenario happen?

If that's how anyone trades the eminis, width of spread is the very least of their concern. A methodical approach with a defined edge and the emotional stability to trade it correctly need to be of primary concern to them.

When a trader has a defined edge, trades for handles instead of dicking around for ticks (until they inevitably fail at that) and constantly works on upping per-trade profit size, getting filled inside the spread isn't even on the radar screen. Pro ES trades commonly <b>chase</b> the market a tick or two on limit orders to ensure fills. When they decide to take a trade, it's for very solid reasons. No need to panic out in knee-jerk fashion two seconds later.

**

<i>"Anyone with more than 1000 posts should have figured out the above. I am not an expert but I do understand basics about trading. My past carnation ?! You suffer from paranoia?</i>

As for your tenure here, my sincere apology if this is your first alias. That's a rarity here, and I'm not paranoid. Indifferent is more apt.
 
Quote from fluttrader:

Let's "prove" this in a very simple way.
Assume the market is at 1400.00 /1400.25
you decide to go long at market , you buy at 1400.25 , immediately you want to close your position at market , you will be filled at 1400.00 ; you start out with a loss of 0.25 = the spread
The market needs to move 1 tick higher to 1400.25/1400.50 to break even.
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To make this clear....yes , if you buy the bid you have an immedite loss if you decide to sell, if you decide not to sell then your buy is the market. Let say that your buy is the last trade of the day then it will settle at your price.
 
Quote from Mercor:

To make this clear....yes , if you buy the bid you have an immedite loss if you decide to sell, if you decide not to sell then your buy is the market. Let say that your buy is the last trade of the day then it will settle at your price.
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that my friend, is the difference between paper trader and professional trader.
 
No need to redo the tax. I trade future myself, and don't like any index ETF. They are very chobby, not my style.

I was reading on some tax forum that board base ETF is taxed the same as futures. But as with anything you read online, you must do your own research.

Quote from heywally:

oops - someone needs to redo their taxes for the last x years.

I trade the ES instead because of the 60/40, easier accounting, low margin (free cash interest), and almost around the clock trading.

Plus, I'm not a wildly active day trader so the total transaction cost not that much of a factor.
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Quote from eveningtrader:


I was reading on some tax forum that board base ETF is taxed the same as futures. But as with anything you read online, you must do your own research.
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Based on my own research, I do not think that is true.

From what I have found out, traders who daytrade SPY also have to deal with the wash sale rule unless they are considered traders by the IRS and have special trader tax status.

Hence, I trade ES and enjoy the 60/40 (thanks, Dan!).
 
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