Why Trade Futures?

this is an going question, there are multilple long threads on this site discussing it

everyone knows open futures positions are not covered by sipc

but there is some question about cash in the account

and no one knows for sure how an open forex trade would be treated with a broker like ib that trades stocks.

if you're asking this question, failure of the broker is the least of your concerns (although I would be extremely cautious if you go the forex route with a forex only broker.)

otherwise, some like stocks better than futures, but it takes a lot of money to make a full time living in stocks, that's why they go with a prop firm.

if they have no need to trade individual stocks, they could theoretically make a full time living trading futures.

back in my day, before computers, before globex, 25k was considered a reasonable starting account for a floor trader on cbot, and 32K for a trader on the merc

I have no idea what a reasonable account would be for a starting full time stock trader, but it would be a lot, more than most have, hence the attraction to futures, and now even moreso for forex, since in spot forex you can trade as small as you want until you figure out what you are doing
 
Quote from Wallace:

FXCM and GAIN/forex.com both back in Canada again have the CIPF displayed on
their sites
even the EU and UK has insurance, only around €40K but at least its something
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Oanda too..

:)
 
cash on a futures account is not covered by anything... only Broker Dealers (BD's) as long as you had a securities account, are covered by SIPC... to the best of my knowledge, IB accounts are SIPC and Lloyds protected against the failure of IB... keep in mind the equity of the company is used first to make investors whole.. which is why it is important for a firm to be properly capitalized...

Quote from oldtime:

this is an going question, there are multilple long threads on this site discussing it

everyone knows open futures positions are not covered by sipc

but there is some question about cash in the account

and no one knows for sure how an open forex trade would be treated with a broker like ib that trades stocks.

if you're asking this question, failure of the broker is the least of your concerns (although I would be extremely cautious if you go the forex route with a forex only broker.)

otherwise, some like stocks better than futures, but it takes a lot of money to make a full time living in stocks, that's why they go with a prop firm.

if they have no need to trade individual stocks, they could theoretically make a full time living trading futures.

back in my day, before computers, before globex, 25k was considered a reasonable starting account for a floor trader on cbot, and 32K for a trader on the merc

I have no idea what a reasonable account would be for a starting full time stock trader, but it would be a lot, more than most have, hence the attraction to futures, and now even moreso for forex, since in spot forex you can trade as small as you want until you figure out what you are doing
More...
 
One thing about the insurance coverage on the futures accounts - TDAmer/TOS offers FDIC insured bank accounts for the cash sweeps from futures trades so that is pretty significant. Of course any existing futures positions are not insured but the cash sweeps from futures positions being closed is. I like that a lot.

There have been many discussions questioning whether SIPC would cover funds used for futures trades and the consensus is that they would not.

One caveat - if you are in an TOS account that has you designated as a "pattern day trader", you lose the FDIC account option ... it might be better to have a segregated futures only account, with that in mind.
 
Quote from ofthomas:

cash on a futures account is not covered by anything... only Broker Dealers (BD's) as long as you had a securities account, are covered by SIPC... to the best of my knowledge, IB accounts are SIPC and Lloyds protected against the failure of IB... keep in mind the equity of the company is used first to make investors whole.. which is why it is important for a firm to be properly capitalized...
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right, but once you are flat, it is sitting in securites, so who knows how it got there? whether from stocks, futures or forex?

at anyrate, I don't want to start this all back up again

there's a thread started by a rather questionable poster who always seems to have beef with ib about cash and sipc.

but I will agree with you, for a pure stock trader who has never traded futures in his account, when it comes to safety there is a small (250k) edge to stocks when it comes to sipc.

Like the man said, "If you are trading, that is the least of your worries."

90% of brokers don't lose, they just don't lose
 
I have actually taken on some current and former Bright equity pairs traders who wanted to get started into futures spreads. I don't think that is a negative per se for trading equity spreads, and it might be an unfair stretch to say that equity spreads are better or worse than futures spreads all things considered.

The exchange margin credits for futures spread positions are very, very appealing. You can easily hold several different market sector spread positions overnight in futures for just a few thousand dollars initial margin if you stay away from the higher vol spreads like certain energy products and precious metals.
 
Quote from Equanimity:

Why do most professional intraday traders trade Futures? Why not Stocks, Options or Bonds? What is it about the ES, CL, GC, ZB that draws the crowds?
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Sorry if already covered as i havent read whole thread . my reasons for trading futures is

Open 24/5 so no opening gaps apart from weeks open ( No Gaps )

No trading halts with profit downgrade , chapter11 ( No Gaps )

No broker downgrades or profit warnings overnight (No Gaps )

No Earnings releases with subsequent sudden breaks ( No Gaps )

Leverage

No Research required

Liquidity

Also trading whenever you want is great , Almost always an active market open somewhere , small quiet sessions pre asian open and after asian close but thats it , FX is nonstop during week

As you note i HATE gaps ........

I traded stocks during 2008 and holding overnight was a gamble and stressful , those opening gaps were hard to live with , never again i say , traded FX and indice ever since with a rare equity trade and only when i knew something most dont .....

I can go to sleep with few concerns with stop losses regularly taking care of business , cant say same for stocks where somedays price can jump 5% over stops
 
Really good info, thanks.

Quote from Wallace:

yes, leverage, but also the reduced day trading margin, and, profit potential

I went from fx to the 6E Euro FX contract Because of the leverage; but there's also the
M6E - micro fx contract, although volume is low - 5,468 v 227,064 for the 6E on 1/8/13
however even if a 1 or 2 pip fill difference from the 6E, still very tradeable

plus one can 'short' the contract - Sell just as easily as Buy since there's no additional
requirements as with shorting stocks. then there's the daily profit potential which in
general, day to day is much higher than can be obtained trading any single stock-

for instance: yesterday the 6E dropped 84 pips from its HH to LL = $1,050 which is a
200% return on the day trading margin, And rose another 30 pips/$375 before closing
try and get anywhere near that sort of intraday profit trading a stock

BUT, leverage is the account killer for everyone who doesn't have a robust intraday
trading system or method; much better to trade Day-to-Days-to-Weeks

Euro FX 6E: Initial margin - overnight: $3,300 ~ Day trade margin: $500
contract size: $125,000 - H M U Z - pip/tick value: $0.0001 ~ $12.50 comm: $4.87
spot fx eurusd @ 1.30787 @ 50:1 leverage $3,269.68 - no lower day trading margin
commission is variable and based on the spread: eg: @ 1.7 = $21.25

Euro M6E: Initial margin - overnight: $330 ~ Day trade margin: $100
contract size: $12,500 - H M U Z - pip/tick value: $0.0001 ~ $1.25 comm: $1.99
spot fx eurusd @ 1.30787 @ 50:1 leverage $326.97 - no lower day trading margin
commission is variable and based on the spread: eg: @ 1.7 = $2.125

ES Initial margin: $3,850 Day trade margin: $400.00
contract size: $50 x Index Value - H M U Z - tick value: $0.25 ~ $12.50 comm: $3.92

futures info via http://www.ampfutures.com/ ~ account minimum $500
fx info via http://fxtrade.oanda.com/analysis/margin-calculator ~ no account minimum
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Quote from 1a2b3cppp:

But don't forget that the Forex market is unregulated and scammy!

Yes, it's great that you can set your own leverage, but you're still trading in an unregulated market with padded bids spreads and stop hunting.
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Oanda and MB are good. They have no bad record with NFA. Very regulated.

Look up some of the other Forex brokerages at NFA's website. Only give your money to the non-dealers; they have zero reason to hunt your stops.
 
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