Stock market on Monday (PREDICTIONS)

[웃 910]

No, it's like buying/selling SPY/DIA, only you buy/sell futures instead of stocks (well, ETFs).

NO COMPRENDI

What are the hours of operation?

[scandal 951]

Try trading S&P or Dow e-minis. They are highly liquid and you can trade long or short at any time - there are no uptick rules, easy-to-borrow lists, locates or other shorting restrictions.

They are also highly leveraged - you can gain maximum exposure in the market at minimum cost.

July 2011 relative volumes of DOW, SP, Nasdaq eMini trading volumes:

http://www.cmegroup.com/wrappedpages/web_monthly_report/Web_Volume_Report_CMEG.pdf

MINI $5 DOW 2,367,042

E-MINI S&P500 43,082,979

E-MINI NASDAQ 100 5,276,369

The Dow futures are much less liquid than ES (SP emini).

I wouldn't say that "nobody" trades Dow futures, since clearly 2.3mil contracts traded hands in July. But it's seriously an order of magnitude the liquidity that's in the ES. It's not where the US stock index future trading activity is.

[mawilson 2,133]

NO COMPRENDI

What are the hours of operation?

Sunday through Friday 6:00pm-5:15pm New York time with a 45-minute break each day beginning at 5:15pm

[scandal 951]

NO COMPRENDI

What are the hours of operation?

24 hours X 5 days, except for a brief 30 minute maintenance window in the afternoon.

http://www.cmegroup.com/trading/equity-index/us-index/e-mini-sandp500_contract_specifications.html

Trading Hours

All time listed are Central Time CME Globex

(ETH) MON-THURS: 5:00 p.m.-3:15 p.m. & 3:30 p.m.-4:30 p.m.

(Daily maintenance shutdown 4:30 p.m.-5:00 p.m.)

SUN: 5:00 p.m.-3:15 p.m.

[mawilson 2,133]

The Dow futures are much less liquid than ES (SP emini).

Good point, though there's probably enough liquidity for LI

[웃 910]

What is happening say at 10am in the "normal markets" vs. the "e-minis futures market"....Does one follow the other at all?

After the market closes at 4pm it's almost always completely flat until 8:30am the next morning...What is going on in the futures market? Very small moves with large amounts of money?

[SuperDuper! 230]

Day trader's paradise. How's your account, LI?

Just short anything today (except gold), and ya woulda made a killing. Rinse, repeat rest of the week!

Oil is on its way to $70

[mawilson 2,133]

What is happening say at 10am in the "normal markets" vs. the "e-minis futures market"....Does one follow the other at all?

Yes, they follow each other very closely. Any premium or discount of the future contract

to the index is determined through the current interest rate level and the number of days

left before the expiry of the futures contract. They tend to converge towards expiration.

After the market closes at 4pm it's almost always completely flat until 8:30am the next morning...What is going on in the futures market? Very small moves with large amounts of money?

They maintain price movement from the previous day's closing price and into the next day's open.

[scandal 951]

I've never traded those and don't know anything about them.

Isn't that sorta like buying call/puts on the SPY/DIA?

You can trade options (calls/puts) on these ETFs (SPY, DIA). Those are single-equity options and are listed on exchanges like CBOE, ISE, PHLX, etc. As you probably know, owning option gives you a right to exercise if its in the money, but no obligation. Selling an option means someone else may exercise his right against you. Options frequently expire out of the money since it's a question of the price of the underlying at expiration vs. the strike price of the option. Hence, options are often hedges (insurance) on an underlying. If they're held naked, they're very speculative and risky. (chance of 100% loss to hold them, chance of infinite loss if you write an option that is exercised against you.)

What mawilson is suggesting is that you trade Futures contracts on stock indices. These are products that trade on CME GLOBEX. A futures contract lets buyer and seller simply agree on a future settlement price for a product. E.g., today the S&P is 1119. I think it's going to rally by Dec to 1200. You think it's going to tank. So you sell me Dec ES 1150 contracts. If I'm right and we rally, my contracts are up and you are down. If we tank, vice versa. The key is: you are effectively shorting, but without needing a locate or borrow on stock, and can create open interest in our transaction. You also do it with much more efficient margin requirements. And we mark our positions to market each night (every day, we settle our daily P&L through the CME clearing house).

It is a good, efficient way to trade and that's why the futures volumes are as large as they are. Keep in mind this whole segment of financial futures (stock index futures, Forex futures, interest rate futures, Eurodollar, etc. ) is quite new. It was all invented since the 1970s and has in some cases overtaken the underlying cash markets.

Also, to bring the story back to options, there are options on futures. CME lists options (puts, calls) on ES, NQ, DJ etc.

There are also options on the raw indexes themselves, and there is arbitrage between index options, index future options, and index ETF options. Fun, fun, fun.

Beware: this stuff is for the grownups. I hang out with them every day, but I don't play with their toys.

[웃 910]

I think I'll stay with stocks for now. All that fancy stuff is too complicated for me.

I've traded options and those are fun. But just a million times more volatile than the stocks. I only traded highly liquid options (X, AAPL, SPY, GOOG, BIDU, AMZN, RIG, CVX for the most part).

Just incredible how if, for example, X moved $1 up since buying in the calls, the calls would go up, say 70% or more....Just complete insanity.

I wasn't allowed to sell calls and buy puts which IMO would make things about 100 times easier due to the time decay.

At this point if I had $100,000 or more and $5,000 to play with I might try a small options account or e-minis account.

But I think for my $ position I am best sticking with stocks for now...Slower, more relaxing, less complicated....

Edited August 9, 2011 by Lord Infamous

[mawilson 2,133]

I think I'll stay with stocks for now. All that fancy stuff is too complicated for me.

Well, for most intents and purposes, e-minis are almost exactly like stocks.

You can buy or sell ES contracts just like you would buy or sell SPY, only with better leverage.

[scandal 951]

I think I'll stay with stocks for now. All that fancy stuff is too complicated for me.

I've traded options and those are fun. But just a million times more volatile than the stocks. I only traded highly liquid options (X, AAPL, SPY, GOOG, BIDU, AMZN, RIG, CVX for the most part).

Just incredible how if, for example, X moved $1 up since buying in the calls, the calls would go up, say 70% or more....Just complete insanity.

I wasn't allowed to sell calls and buy puts which IMO would make things about 100 times easier due to the time decay.

At this point if I had $100,000 or more and $5,000 to play with I might try a small options account or e-minis account.

But I think for my $ position I am best sticking with stocks for now...Slower, more relaxing, less complicated....

Back in 2001/2002 I was trading stock options. If you can call what I did trading. Mainly just buying deeply out of the money puts for about 3-6 months out, and waiting for the trade to "come to papa" as the POS underlying (mainly Micron, as I recall) kept cratering and the puts would come into the money. Nothing sophisticated, but for a time it was working and a huge adrenaline rush. Enough that I know the feeling a trader has when on his trade. I also wasn't margined: this was purely cash based trading in an after tax account, my "messing around" money (yeah, pre-divorce I had such a thing). Eventually, the trade went bad (they always do), in my case mainly because the tech bust bottomed out, and we went into a bull market. That was ok, I enjoyed the ride and wasn't sad when it ended.

Now that I see first hand how the high frequency algorithmic game is played, I want no part of it. Retail trading is a suckers game. These guys with their dark pools and flash orders and front running customer flow ... no thanks, not for me. I'm strictly a boring buy and hold index fund guy now. 20 years till retirement and 3 kids to put through college - I don't need any more market fireworks in my life. I see it in action every day at work anyway.

[웃 910]

Well, for most intents and purposes, e-minis are almost exactly like stocks.

You can buy or sell ES contracts just like you would buy or sell SPY, only with better leverage.

This was a message I got from a forex trader when I had a website years ago...

"Your idea is interesting, however we are Forex traders (traded equities for years, moved to ultra-ETF's and finally Forex). If you are a good technical trader then Forex is really the only game in town because of the leverage 1:400. Let me know if your offer is still applicable. Thank you in advance."

What is the leverage like in the e-minis?

Edited August 9, 2011 by Lord Infamous

[웃 910]

Now that I see first hand how the high frequency algorithmic game is played, I want no part of it. Retail trading is a suckers game. These guys with their dark pools and flash orders and front running customer flow ... no thanks, not for me. I'm strictly a boring buy and hold index fund guy now. 20 years till retirement and 3 kids to put through college - I don't need any more market fireworks in my life. I see it in action every day at work anyway.

I agree completely...Well 95%...For one I still have a few years of high risk in me where I can take big chances.

For two I believe in that 5% chance of success.

There are some really successful traders on a stock forum I frequent. I know it is rare but it is possible, just highly unlikely.

[mawilson 2,133]

Now that I see first hand how the high frequency algorithmic game is played, I want no part of it. Retail trading is a suckers game.

Mostly, yes. However, there are low-frequency strategies that work and make money every day. I've seen them. They exist. They are real.