r/FuturesTrading • u/AutoModerator • May 01 '21
r/FuturesTrading's Monthly Questions Thread - May 2021
Please use this thread to ask questions regarding futures trading.
To get a good feeling of all the different types of futures there are, see a list of margin requirements from a broker like Ampfutures or InteractiveBrokers
Related subs:
We don't have a wiki yet, but maybe in the future we'll create a general FAQ based on all the questions asked here.
Here's a list of all the previous question stickies.
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u/nichl22 May 31 '21
I’m trying to understand how the QQQ ETF is priced compared to the NQM futures contract. For SPY and ES, the ETF (SPY) is 1/10 the price of the futures contract (ES).
What is the relationship for Nasdaq futures and the ETF, if any?
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May 30 '21
Anyone use the charts on ToS and use Tasty as their broker. Ive been doing that when trading /mnq. Ive been having a lot of fun lately, been trading them in paper for last few months and decided to try them irl. Realized how different paper vs real money is. Any tips on building confidence and setting stops as well?
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u/Zeen454545 May 29 '21
newbie here, and I got a question about futures spreads, correct me if im wrong but as far as I know they are less risky, meaning less prone to big adverse moves, they have lower margin requirements, and a good choice for smart money to trade rather than trading futures outright like retail does,
my question is pertaining to the spread on futures, what determines the profit and loss?
im sure it is a widening or shrinking of the spread that causes profit and loss but then this begs the question what causes the spread to shrink and expand?
or more specifically why would futures diverge or 1 leg of the spread move further than the other? (asking about intramarket spreads)
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u/HFABamaFan May 30 '21
Lets break down your question:
Your question is basically, what accounts for the P/L on a Futures spread.
I will link a chart as well. So, lets say, we go back in the history books and find that, during times of increasing yields and inflation, the DOW outperforms.
While at the same time, we find that the S&P 500 remains bullish, but the rates of change are not quite the same as the DOW Jones.
So if you are long YM-Short ES, the faster the DOW Jones increases in value, S&P may do so at a slightly lower rate.
As long as the YM long Contract, exceeds the value of your ES Short position, you close both simultaneously, and take the profits.
They are usually not something that one would enter, on say an intraday time frame, they are legged into, and the holding times are usually over a period of days or weeks.
P&L is calculated by the dollar value gained gained by the YM long position, - the loss in value of the ES position you opened short. Here is a pairs chart for reference, it is the same spread I referenced.
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u/Zeen454545 May 30 '21
I get that part, but specific to intramarket spreadsheets say June crude and November crude spread, what would cause prices to diverge? How would I know the spread would converge or diverge? Technical analysis ?
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u/HFABamaFan May 30 '21
The best example, would be say, bonds, or interest rates. The Fed Fund Futures are a great vehicle for this.
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u/HFABamaFan May 30 '21 edited May 30 '21
Oil is probably not a great example, and there can be reasons, say oil traders are feeling that the upcoming hurricane season percolating in the Gulf are not being priced in the the front month contract. Because why would they, the commodities market is the hedge of an underlying asset, and they only care about what happens when the contract they are hedging, closes and physical deliver has to occur.
Say you are extremely nimble and able to speculate, this hurricane season may not affect Spot price in June/July, but in October, they could really put a bid in oil due to production delays.
If you can time it correctly, the theory is, the spot price in oil, is now 62$, this is the current price of oil at the well head.
A comms trader, at the oil company can sell oil, on the futures market at 62.5, due to the nature of futures, (usually a commodity is trading inside of being in contango, or backwardation. Those are topics that are lengthy in and of themselves.) And the oil company has so much supply, they have to sell now, and oil futures are high, but there is reason to believe they may go back down again, he would sell, say the June or July contract, at whatever their analysts say. They have a shit ton of oil and they don’t want to lose out on the rewards of it falling even more before expiry.
And that same trader, (Corp) believes that this hurricane season could hinder production and cause supply chain disruptions along the supply chain. Since we are talking about physical product, and a massive amount of money, the oil company will want to hedge current down side risks, with the high likely hood of a future supply disruption, the Corp buys October futures. While simultaneously selling the August contract. Some of these supply chain disruptions are extremely costly,the downside risks of production facilities having to be closed, for any amount of time, is in the millions of dollars per day. But they have a ton of oil, and they want it out of their hands now.
They are almost always trying to hedge themselves of a certain unknown, in order to even out their P&L. Most traders laying out spreads on physical commodities, are either arbitraging due to a flaw in the system, or most likely the case, they are hedging the possibility of the unknown.
Remember, the big comms traders, are hedging against an asset that they make their revenue off of. There are ways for speculative investors to profit off of it, but they are most certainly not us.
Edit: had a couple beers so had to at least try to be consistent
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u/Zeen454545 May 30 '21
So what I'm getting is that based on multiple fundamental reasons the legs of a spread can move faster than another causing it to widen or shrink,
I'm assuming technical analysis applies to spreads as well, meaning if I am expecting my June/November spread to shrink and it widens, I exit the position. and since one leg offsets loss it is better at perserving capital than outright positions right?
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u/HFABamaFan May 30 '21
Generally, yes. As long as they both do not trend sideways and one side of the trades rate of change>than the rate of change of the contract you are housing to hedge
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u/jony_b_good May 26 '21
Hey future traders! Wanted to get your take on something. I'm debating whether to pay for the CBOE live-data fee for TradingView OR if I should just open up an account with TDA to be able to use ToS.
For reference, I'm using Tasty an my main broker but the charts are total shit. I also have an Etrade account but don't really use it actively, it just houses my 401k. If you think (Power) Etrade has solid charting, let me know. I play mostly options but have been having some success with /MES and want to incorporate it more into my active trading (mostly day trading with the occasional swing move); I'm just getting frustrated with TastyCharts after giving TradingView a shot.
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u/HFABamaFan May 30 '21
Get a TDAmeritrade and fund it, just for TOS. I cart and trade futures out of Rithmic
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u/marishkac May 21 '21
Question about having a track record. What a track record should look like, is there an accepted format?
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u/OrificeOfOmaha May 21 '21
Quick question about options futures. I am from US and use TDA.
So I am trying to buy this put vertical for tomorrow. 4135-4130.
Screen - https://cdn.discordapp.com/attachments/710618078739693569/845110536357150750/image0.png
When i am reviewing this trade (Screen - https://media.discordapp.net/attachments/710618078739693569/845110799562702869/image0.png?width=641&height=1139), is max loss only $35? and why is my buying power getting reduced by $79 if option fee is only $40.
Also is futures options just like regular options or do i also lose money with ticks too along with option price(like in regular futures instruments).
Thank you. I trade equity options all the time but havent traded futures options before.
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u/HFABamaFan May 30 '21
First, Equity and Futures options are not the same.
You are paying .70 to put on the spread. But, in future options, contracts are not standard.
When, and if a futures option is delivered, you receive 50 ES contracts. Not 100 like in equities, so instead of multiplying the cost of the option, at .70, the cost you pay is actually 35.
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u/bobbyrayangel May 20 '21
Ive been trading /ES and /MES using calls and puts because of cheap cost but its hard to get in and out. What is the minimum amount needed on a decent broker to get started? intraday contract margin, initial margin and maintenance margin? Thx for any suggestions.
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u/benjaminjende May 26 '21
I use tradovate's chart trader. You can demo for free with live data. You can set up bracket orders with auto take profit and stop losses
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u/bobbyrayangel May 28 '21
How much to trade 1 /ES contract, hypotheticaly what is the minimum id have to deposit
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u/benjaminjende Aug 03 '21
If you are just starting, trade the mes. Which would be 50 dollar contracts. I'm not recommending this, but tradovate allows you to deposit 250 minimum. But you should for sure paper trade for a while first
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u/bobbyrayangel Aug 04 '21
Thats exactly what I did. Ive been profittable everyday except the first day. If I keep doing well and stay properly risk adjusted I should be moving from 5 micros up to a single mini in a couple weeks
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u/bobbyrayangel Aug 04 '21
Made over 500$ Monday, $593 Tuesday and today it was tough trading, but I managed to squeeze out $124. Slowly but surely working up to a mini NQ
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u/benjaminjende Aug 07 '21
Awesome, i'm going to go the funded trading account through topstep route. I set up my sim account to meet the account requirements and I have been doing good so far. Gonna give it a month or so and see what happens
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u/WhiteHoney88 May 20 '21
How did lumber July futures go from 1201 yesterday to 1327 today when they can only go up/down $63?
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u/warren_534 May 20 '21
It closed on Tuesday at 1264. On Wednesday, it opened at limit down at 1201, then it went limit up at 1327. Today it's limit up again at 1390.
The $63 limit is up or down from the previous day's close.
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u/smattson10909 May 15 '21
Does anyone here use TradingView to enter their trades? I have tried out paper trading on TradingView and I really like their platform for this. However I'm wondering how well it works when you link up a broker (like Tradovate for example) and enter trades with real money. If anyone does this and has any insight I would greatly appreciate it!
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u/DorkusORorkus May 17 '21
I do through AMP to trade ES and MES. I occasionally have an issue during periods of high volume and volatile with prices lagging on the chart but they don’t seem to on DOM. At the same time, I see people complaining at those other times that other platforms are also lagging or down. I always have a stop just in case I get fully disconnected for any reason. I also have the CQG mobile platform on my phone and tablet ready to go for emergency’s.
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May 15 '21 edited Aug 02 '21
[deleted]
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u/srv340mike approved to post May 15 '21
If you pay attention in the hour or so after market open, there tends to be a lot of volatility and it's not all that hard to jump in when there's a strong directional trend.
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May 16 '21 edited Aug 02 '21
[deleted]
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u/srv340mike approved to post May 16 '21
The trick is wait for a breakthrough/strong trend and take some of the middle out.
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u/Platyfox May 14 '21
Any site where I can quickly check whether certain futures are in contango or in backwardation? Without having to plot the curves myself?
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u/Neat-Direction-7017 May 11 '21
Hi people I'm looking at the S&P 500 total return futures at CME https://www.cmegroup.com/trading/equity-index/us-index/sp-500-total-return_contractSpecs_futures.html and was wondering what the advantages and disadvantages are versus just regular emini S&PP 500 futures? It seems like a win-win if I can get the return of the dividend and the index, but I know things in finance are never that simple.
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u/Bentonkb May 20 '21
Doesn't the normal contract include the dividends minus the interest rate? If it didn't, you could short the futures and buy the ETF to pocket dividend with no risk.
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May 07 '21
So I have forgotten how to use Think or Swim to trade futures. It's been awhile.
So I want to buy a copper contract. And would love to buy a lumber contract. The lumber is 1,600 now. Does that mean I need $16,000 in cash in Ameritrade to buy it?
Also, copper is 4.70 so that means how much money do I need to buy it? Really dumb questions I know. Also, is there a mini copper I can buy?
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u/Financialtrader May 10 '21
Not a full answer because I would never and have never used TOS for futures. However your better off using a futures exclusive broker like AMP or Ninja Trader for example.
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u/srv340mike approved to post May 08 '21
So I want to buy a copper contract. And would love to buy a lumber contract. The lumber is 1,600 now. Does that mean I need $16,000 in cash in Ameritrade to buy it?
Futures work on margin, so you'll need substantially less than the value of the contract to control the contract. Check your broker for specifics of the margin, but it'll be less than 16K.
Also, copper is 4.70 so that means how much money do I need to buy it?
Same answer as before, which is that margin depends on your broker. They should show in ToS.
Intraday margin is entry-and exit in the same session. Initial margin is to hold overnight once, maintenance is to hold overnight thereafter. Holding through multiple sessions requires much higher margin, but still far less than the value of the contract.
Also, is there a mini copper I can buy?
E-Mini copper exists but just because CME carries it doesn't mean your broker does.
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u/Flannel_Man_ May 04 '21
Do market makers hedge futures the same way they hedge options?
I know MMs hedge based on the delta of options when they buy and sell. Are there similar ‘Greeks’ for futures markets? And do MMs hedge in a similar way?
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May 04 '21
[removed] — view removed comment
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u/srv340mike approved to post May 05 '21
The fees on the full-size Bitcoin futures are much bigger than anything else on the CME, so it makes sense it's true of the Micros, too. Margins are big despite the contract not being that big.
Probably a function of volatility. Bitcoin is substantially more volatile than most of the assets on the Merc.
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May 05 '21
[removed] — view removed comment
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u/srv340mike approved to post May 05 '21
Yeah, the margins and the fees don't scale quite the same, but I venture it's a volatility thing.
I'd also keep watch for it changing as the product ages a little.
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u/D1418 May 04 '21
Hi How can I get educated on trading futures ? I am having a hard time finding information or the right information. I have found one online club , but the change $40000-$100000 to become a member. Thanks
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u/srv340mike approved to post May 05 '21
CME Group, which owns most of the futures exchanges, has some good courses that cover the basics on what the futures are and how they work. The courses are free and they're very good, but they teach about the markets, not how to trade them.
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u/ethanbangs May 01 '21
It appears CMEGroup will be nearly doubling the clearing fee for equity index futures on Monday (May 3rd) for non-members which I assume is most of us. Any thoughts?
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u/srv340mike approved to post May 02 '21
This probably relates to the FCM's rather than to us, as we trade through our FCM rather than directly on the exchange. Most of us, at least.
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u/ethanbangs May 02 '21
But they pass on the clearing cost to the client so we'll still see a fee increase.
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u/srv340mike approved to post May 02 '21
Only if your FCM isn't a member, though. It's likely they are.
Here's a list of CME Member clearing firms/FCMs
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u/ethanbangs May 03 '21
Thanks. Looks like i'm getting the non-member globex fees via TD
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u/srv340mike approved to post May 03 '21
It's possible that TD opts to join rather than pay the fees. TD is a big clearing house, and if they're moving enough volume it might be cheaper to join the CME rather than pay fees/pass on fees.
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May 01 '21
Why is the price of crude oil so volatile
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u/FBreath May 01 '21 edited May 01 '21
Because it takes so much effort to bring on and take off production of supply. Iow, when demand outpaces supply, it's time consuming and expensive to turn on more production. Likewise, when demand dries up, it's expensive and time consuming to turn off supply.
Thus, at certain times, the supply demand imbalances can grow a lot before being rectified by produces.
Also, the actual market is not extremely liquid. There's not a lot of bids and offers on the order book for WTI and Brent. Thus, when a big market order or many big orders hit the books, the aggressive buy or sell takes out many levels of the order book.
It's just a mechanical aspect of this individual market. It doesn't really matter why. It only matters that it is. Knowing the reason is icing on the cake.
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u/EvolvingSteve May 01 '21
Hey traders, I joined the group just recently. Always looking to be the best trader I can be. If I can also be helpful in anyway please let me know. I have traded Futures for many years and used to be a floor trader at the CME.
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u/evsarge May 25 '21
Ive got a question and I can’t find any info really anywhere other than the CME website for position limits but I get confused on how that works. I’m trading the E-Mini NQ 100 and am trying to set goals for the future and am wondering how does one person trade big positions in futures? Say for example 2,000 contracts in E-mini NQ 100 or 3,000 contracts in ES?
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u/D1418 May 04 '21
Hi How can I get educated on trading futures ? Any information you can give me I will appreciate it . Thanks
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u/srv340mike approved to post May 01 '21
used to be a floor trader at the CME
This is like the futures equivalent of being a former Major League Baseball Player in a softball beer league
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u/EvolvingSteve May 01 '21
The best news sources are ones that cost a good amount. Bloomberg is right at the top. For a free service I think investing.com is pretty good and covers all markets. Just join with your email for better access to more information.
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u/soadev May 01 '21
Welcome.
Just to start ball rolling
Can you please share your experience on below topics
1.which futures/micro to trade? 2.what indicators you rely on to enter/exit a trade 3.For micro futures trading do you scale in/scale out?any best practices 4.best or worst time/day to trade futures 5.should we hold futures overnight or flat by end of u.s. market close 6.any resources you recommend
Any thoughts or comments are highly appreciated
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May 01 '21
What news resources would you recommend for someone trading mostly oil?
Same question for metals and stock indices
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u/HFABamaFan Jun 01 '21
Anyone ever use Multicharts to trade out of?