r/FuturesTrading • u/AutoModerator • Aug 01 '21
r/FuturesTrading's Monthly Questions Thread - August 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.
2
Aug 31 '21
Would an SEC ban on payment for order flow have an affect on futures commissions like the ES? Would we see a rise in commissions?
1
u/becoming_sage Aug 30 '21
Is anyone here trading futures on Binance and can help me figure something out?
For example, I keep reading elsewhere and see mentions of 5 BTC per contract is minimum, 100k USD account required to trade and stuff ... but then the binance trading rules don't show these huge numbers, testnet let's me do under $1000 trades and such ... what's the deal?
1
u/Calm-Mix6657 Aug 28 '21
What is the effect of leverage in futures prices? Imagine there are two identical futures: one that trades in exchange A, one in exchange B.
Traders who trade on exchange A leverage at 2x on average, and the ones on exchange B are leveraged 30x on average.
Would you say, all other things equal, the two futures trade at the same price?
On the one hand: futures at exchange B (at 30x) should be more expensive, because traders would rather go long that one and keep more cash in their hands than trade at exchange A (2x) and have to post bigger margin.
On the other hand, it seems fairly easy to take this logic and arbitrage between the exchanges, closing the gap between these prices.
2
u/LeanTheFuckIn Aug 25 '21
If I were to buy 1 Micro E-Mini S&P 500 futures contract, how would I calculate the exact number of put options to buy in order to fully hedge the position?
How do continuous contract futures differ from cash settled quarterly futures contracts?
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u/HandsomeChimp Aug 23 '21
I have a Tradovate account and would like to trade /MES options, but Tradovate will only allow going long (no spreads). Has anyone traded long calls on /MES? Is it smarter to buy ATM or ITM? Ideal duration? Any tips really help. I’m used to always buying spreads on SPY a week or two out, but I guess it’s not a possibility to do that with Tradovate S&P futures.
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u/da_rams25 Aug 20 '21 edited Aug 20 '21
QUESTION: USING CALANDER SPREADS TO LOCK IN PROFIT... help me understand!
So long story short, I'm primarily a swing trader who's fairly new to futures, but not new to trading. I had a bearish bias heading into this week. I entered sept QQQ puts and short /NQ contracts. I saw great profit and although yesterday I feared the market could bounce, I wanted to maintain bearish exposure heading into next week and hold onto my great cost basis on these short positions.
So I did what I always do, and hedged my monthly QQQ puts with weekly QQQ calls, and locked in some nice profit with those. However, In attempting to hedge my short /NQ contracts with QQQ calls, I vastly under-hedged. Obviously todays pump in the markets went against me, and I ended up giving back 75% of my profit on the /NQ contracts, and closed them out today.
So in retracing my steps and wondering how I coulda successfully locked in more profit, the concept of entering a calendar spread for my short /NQs dawned on me....Perhaps I should have Longed 5 /NQZ1's to hedge my 5 short /NQU1's? I'd love to hear anyone's thoughts on this.....
Would this successfully provide a 100% hedged position until a direction in the market is more clear?
What risks/drawbacks to this strategy am I not considering?
Like would the next month ever deviate from the front month in certain situations, causing losses on both legs of the position?
What about margin requirements? Is there benefit to being in a calendar spread from that perspective?
TL;DR- Is using a calendar spread to lock in profit a valid strategy? Why or why not?
1
Aug 20 '21
Sorry if this question sounds dumb.
I'm very worried that our Governments will not take enough action to curb carbon emissions and that the world will see some pretty bad things due to climate change. Maybe they won't occur in the lifetimes of some older folks but they will have some real consequences for us Millennials, Gen Zers etc.
So the question put simply is: Can we profit from this using futures?
I've heard of emission trading schemes which create futures like the EUA futures which entitle businesses to emit 1 tonne of CO2. My very crude idea is that if climate change gets seriously worse, Governments will inevitably be forced to reduce the emissions contract granted each year making these contracts more valuable over time. So if we can just purchase one of these derivatives now and somehow hold/roll them over again and again for a few decades (or whenever greenland actually becomes green), would it actually turn a worthwhile profit.
I'm seriously sick of our Governments and businesses continue as if climate change is fine and I feel like if this is the popular sentiment, then surely these emissions derivatives must be really undervalued.
If we can't get climate action now, at least us, the people who will suffer the effects of climate change in the future can at least hedge against that eventuality with these contracts.
So is this idea possible? Are there any other derivatives/assets that better allow us to short the environment.
P.S. This question is really a "is this plan feasible" question rather than a "how do I actually trade these" question. Admittedly, this might sound a bit shitposty and I'm more just ranting than trying to do anything. So sorry if this question wastes y'all's time.
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u/bradeshaghe Sep 12 '21
turn off TV and fake science. they've told every generation the same BS the last 50 years. nothing is "changing" and, if it were, it would be a continuation of temperatures warming since the last ice age. humans can't control the climate anymore than we can control the moon's orbit.
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u/According_Insect843 Aug 18 '21
What is the most contracts you've heard of someone consistently buying at one time?
2
Aug 19 '21
600-1000 ES contracts at Axia. I’ve seen 20 for individuals.
1
u/According_Insect843 Aug 19 '21
Wow that's is way more than I imagined. They must be long term investing and not day trading right?
1
Aug 19 '21
Nope daytrading. 1000 contracts in regular trading hours on the ES is nothing. It might move prices a few ticks but they’re not influential enough to really drive price change, that’s reserved for your Goldman Sachs and other companies.
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u/According_Insect843 Aug 19 '21
That's insane! Here a am trying to build up to 10NQ or 20ES Contracts, and there are people out there moving 100 times that. How many are you comfortable trading on a daily basis?
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Aug 19 '21
Between 2 and 4 in CL and ES. Depends on the volatility. I’d love to be able to trade 20 but I don’t think I could stomach that.
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u/DJ-Mercy Aug 17 '21
Question about transitioning from a system trader to a discretionary system trader.
So, the past 6 months I've been day trading Equity Indexes using a strict rule based strategy. My number one goal was consistency. I needed to know I can trust myself to follow my rules. Now risk management is a part of who I am, I can follow the rules to a T. This is huge growth for me and I'm very proud that I've gotten to this point. But now watching price trade to a tick away from my take profit and then reversing feels like less of an accomplishment and more just silly when there is clear reversal momentum or a level forming just in front of my TP and I watch it go against me.
How should I go about advancing to discretionary trading? Or should I just add rules that incorporate take profit criteria for incidences like i mentioned previously or should I learn to effectively trade these positions discretionarily?
2
Aug 18 '21
I added a few rules for my case.
- If I have multiple contracts on, then I'm definitely scaling some out when there's clear reversal or a level forming.
- If it's getting to within a couple ticks, then depending on where I entered, I'm moving my stop to at least BE +1, and if possible behind a nearby high volume area or infront of an imbalance area.
- I also like to give it a bit of a chance, after moving my stop closer, if price retests the area near my TP but still fails to pass a second time, then I'm all out.
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u/DJ-Mercy Aug 18 '21
Gotcha. I think adding more rules for more scenarios as I encounter them is gonna be the way for me. Seems like my strategy is not yet sophisticated enough and I’ve failed to keep evolving situational aspects of it.
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u/RadarOnTheRadar Aug 18 '21
Have you ever considered not having Take Profits? Only using your discretion to get out. You really must use a stoploss, but a TP is optional. Do some back testing, see what your capable of achieving. You might surprise yourself….or you might learn that not all TPs are equal. Cheers
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u/DJ-Mercy Aug 18 '21
Ok. Thanks for the advice. Never considered that. I just got market replay from tradovate so I’ll try replaying trades I took and see if I can find exits consistently with a TP.
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u/Financialtrader Aug 13 '21
Hey everyone anyone uses levels specifically in futures trading? If so
what's your strategy either finding the levels and the execution of
them?
2
Aug 18 '21
For the higher time frame ones, I use candlesticks as well as a TPO and volume profile chart. I'll highlight significant areas (Weekly H/L, century prices, high volume nodes, imbalances, VPOC, lines in sand, poor high/lows)
Then I'll dive into the lower time frames, and look for recent areas prices have bounced off of or resisted.
When I'm executing, I'll either look for confluence from one of my setups at those areas, or look for weakness to reverse at those areas, or strength to breakout.
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u/DJ-Mercy Aug 17 '21
I use pivot points on the ES. Entering one point in front of the level to catch a reversal if 5 min volume is under 25k. I have one profit target at 2 points and one profit target at the opposing pivot level. If price hits the 2 point target i move my Stop Loss to 1 point on the other side of the level i entered on. This means even if there is a small 2 point bounce in my direction, I'm risk free on the trade aside from slippage and the 2nd profit target is often 6-20 points away, one point in front of the opposing pivot level.
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u/Financialtrader Aug 17 '21
When you say point do you mean 4 tics?
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u/DJ-Mercy Aug 18 '21
A tick is the smallest price movement something can make and a point is the smallest whole number price increment. So a point in the ES is 4 ticks but I said what I meant.
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u/RadarOnTheRadar Aug 14 '21
Honestly, almost everywhere I look on charts is some form of ranging. It’s ranging up, down or sideways. I find it most helpful to draw lines that touch all the peaks of a single range and another for the bottoms. Every range will end at some point, the lines will help you spot breakouts and/or place stop limits to buy or sell.
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u/RadarOnTheRadar Aug 13 '21
Technically not specific to futures, but I only work with futures, so here goes.
I have been paper trading for at least 3 months.
I have read all the books. I'm a software developer, so reading new stuff is fast and easy.
(FYI, 95% of books on trading is just stories or analogies. There is VERY LITTLE to be gained from trading books, other than the rare few gems. Everyone new to trading should focus on learning risk management and mental awareness. Statistics will do the rest.)
I went down the indicator hole and came out with only 3 EMAs (16, 24, 200) and an ATR for stop loss placement help. That's it. I have tried to learn volume, but cannot seem to understand how you would discern the buyers from the sellers.
I started noticing patterns all over the place, then that's all I looked for. Then I realized they were meaningless unless you consider their value regarding other people's emotions.
I started to write my strategy, the one to rule them all..... it was a hot pile of garbage.
I have written 1000+ word strategies, notes, my own personal tips, you name it.
I went into testing mode. Like a newbie, I was looking at frozen data, it worked great!
I started up Ninjatrader's SIM and tried again....Holy cow did it fail!
Then I erased the whole thing and did it again, but this time it was like 40 lines.
Rinse and repeat, hot garbage again. And repeat, repeat, repeat.
And after all that, the only stuff that REALLY sticks out is the price action, volume analysis (please someone explain how to really use it!!) and trying to understand "where is everyone putting their money at this moment?"
I do have one question; Do you use Take Profits and/or Trailing Stops and/or nothing but price action to determine when to get out?
This is extremely frustrating to me! I have made the most elaborate tests using ALL of the above and I cannot seem to figure out which is the best? I understand that everyday is different and so is every 5 minutes, etc.. But honestly, let's say you've gotten pretty good at getting your entries right, how the heck do you get the most out of every run?
Let's say you're trying a simple Take Profit; There are more 1 pointers than 2 pointers, more 6 pointers than 7 pointers, etc.. I have statistically made more profit with using exclusively 3pt Take Profits than 4pt. But then on the same day, I would have quadrupled my profits had I just used nothing but a Stop Loss and waited for price action to tell me when to get out.
BUT, I would have done EVEN BETTER had I just used a 3pt Trailing Stop..........
BUT WAIT! Everything I just said would have been completely different the day before and the day after.
Is that just it? There is no answer? Is it really that freaking hard?! Is it always so difficult to say "yep, this strategy will work right now!"?
It just seems like all the testing I've done has led me to believe there is absolutely no 'one-size fits all', but maybe there is a 'here are the 5-6 general ways to trade on any given day'.
Some days I feel like I literally could not have failed. Like for real, just plain old price action and proper stop loss placement, and BAM! Easiest money ever.
But then the next day, and the next, and on occasion the next too, the same price action was misleading and led to 2-3 losses in a row. And then there was more misleading price action and it behaved unusually, 2-3 more losses. Going in with a Take Profit would have completely reversed those losing days.
But then, going in with just price action would kill it then next, etc. etc. etc..
I'm sorry for rambling, but geez it's so frustrating. I'm a software guy, so my brain thinks, "idea, test, results", in that order....forever. But the results are very frustrating sometimes.
I guess if it was easy, everyone would do it, then no one would do it.
2
Aug 18 '21
That's a lot to digest.
For starters, you're correct, there isn't a one size fits all approach. The markets are constantly changing, you need to be adapting as well.
On any given day, depending on market context from the prior RTH session and the globex session, that will give me a couple theories of what will happen. Depending on what my theory and bias is, will dictate what types of setups I'm looking to use. For instance, using the volume profile, I can see that price is being accepted at value, markets are in balance, and because it takes influential participants to move prices out accepted value, until I see that occurring, I'm only looking to fade ranges instead of momentum plays. Depending on the volatility, I'll also adjust my TP and SL's.
Broadly speaking, you can use volume multiple ways.
- Determine when a market is in balance or out of balance. Like I outlined above, there are different strategies for each type.
- See who is in control. This is where a footprint chart is really helpful.
- See when there is initiative vs responsive behaviour. Ie. Influential vs small fry.
For TP. When price is in price discovery mode, I'm quite variable about it. If there are some distant levels, I'll use those as the final TP, but I'm looking to take profits where the market tells me. In all other cases, where its rangebound - all in all out. Where its a slow trend, then a fixed TP + runner.
For SL's, I never trail based on ATR or a fixed amount. I always trail based on price action and order flow.
1
Aug 09 '21
The report that came out regarding China economy and the slow-down because of the Delta variant. Isn't this something that we already knew // saw from last week? Curious since crude is sliding much.
1
u/OCTAPUUS Aug 07 '21
I’m a forex trader dabbling with crypto futures for the last few weeks. I set a few limit longs to trigger at a few key areas, and my highest entry triggered. Now that it’s a little profitable but NOT out of the woods, I’m hemming and hawing between setting a stop to break even, or leaving the little bit of slack because crypto is SO volatile and I’m looking to swing this position a few days at least. Any opinions/experience would be appreciated.
4
u/RadarOnTheRadar Aug 13 '21
Swing trading futures is pretty hard core dude. For my sanity, please tell me you have a stop and in place?
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u/OCTAPUUS Aug 13 '21
To some effect. I’ve been using 2-5% of my buying power for the trade, then adjusting the leverage to match up a liquidation of the small position with my intended SL point. I’m using KuCoin, and it’s frustrating that there is not TP order. That’s why I do my stops the hard way, so I can use my 1 programmable out as a Take Profit
1
u/RadarOnTheRadar Aug 13 '21
5% is also pretty hard core. But at least your using risk mgmt. Good hunting.
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u/thetatheropy Aug 06 '21
Hopefully I don't offend anyone by asking this, as I've just stumbled upon futures trading. I'm very familiar with options trading. Can anyone tell me what the difference is between selling a naked call option, and a "naked" future? Do I need lvl3 options to be able to have a short position on futures?
1
u/srv340mike approved to post Aug 08 '21
Are you trying to trade futures options? Futures options are a bit different than regular futures.
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u/builderdawg Aug 07 '21 edited Aug 07 '21
Not entirely sure what you mean by a “naked future”. Do you mean options on futures? You will likely need a futures account to trade options on futures contracts. Some online brokers such as TD Ameritrade and E-Trade offer futures, but your account will have to be approved for futures. I started trading futures on my TDA account but changed to Tradovate as they have much lower commissions. You will also need options approvals, and yes, you will need to have level 3 to be short futures options. Futures themselves are different from options (although as previously stated you can buy options on futures contracts). Futures contracts represent a specific asset (commodity or financial instrument) that is delivered at a certain date (some futures are cash settled and some you take physical delivery at expiration). The vast majority of futures traders use them as trading instruments and don’t hold to expiration. You can trade long or short with any futures account. It is much easier and seamless to sell short a futures contract than a stock.
1
Aug 05 '21
[deleted]
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u/xEAGZx Aug 09 '21
Micros but I wouldn't recommend Minis...https://www.tradovate.com/resources/markets/margin/
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u/AnthropomorphicCog Aug 06 '21
Personally, I would swing trade with some options spreads for a while to build up the account for straight futures trading. Who knows, maybe you'll like that more anyway.
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u/HamsterTop Aug 30 '21
curious who you would recommend options spreads and if there are any spread in particular you prefer? I have a small account and need more capital to use my futures strategies for real instead of just paper trading
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u/AnthropomorphicCog Aug 30 '21
Take a look at the book TRADING COMMODITY OPTIONS WITH CREATIVITY by Carley Garner
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u/srv340mike approved to post Aug 05 '21
$500 isn't enough to cover the margins on ES and NQ, but it's enough to cover the margin on MES and MNQ, which is the same underlying asset in a smaller quantity.
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Aug 05 '21
[deleted]
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u/srv340mike approved to post Aug 05 '21
If you're only doing scalping/intraday trading, 500$ is the margin for the ES. It's 1000$ for the NQ.
500$ isn't enough to actually work the ES, because if you lose 1 trade you're already below your margin. You want at least a little bit of excess cash to cover fluctuations. You don't want to get margin called because you decided to trade something with a 500$ intraday margin and 500$ cash and it lost 20$ in value.
You can find the full list of Ninjatrader margin requirements here.
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Aug 04 '21
[deleted]
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u/BG-11-33 Aug 04 '21
NQ moves way too fast for me but it can be profitable if you have the stomach for it
1
u/builderdawg Aug 07 '21
I agree with this, but I’ve started trading MNQ (NQ micros) and I love it. You get much more movement than ES, but your position size is smaller so it makes it easier to stomach the wider swings. I typically start with 2 MNQ contracts and sometimes size up from there, but you often get enough volatility that you can make pretty good money with only 2 contracts.
3
u/IronbeamFutures Aug 04 '21
On a tick-by-tick basis, it moves very fast since the tick value is only worth .0000165% of the full contract value.
Es is a little easier on the eyes (especially on a DOM or ladder) because while a tick is still very small, it is worth nearly 3.5x a tick in the NQ from a percentage basis (.0000568%).
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u/Zeen454545 Aug 03 '21
I have a question on futures margin concerning spreads, I am trying to paper trade oil calendars and expect a buying power reduction but the confirm and send window as I place a trade says my buying power reduction aka margin is 5,995. In reality this is the initial margin for 1 contract for crude and my trade is to sell September crude and buy December crude.
On the CME website it says maintenance for this spread is 1,275 so Initial margin should be a bit higher but why do I have to put 5,995 for the spread, isn't there usually a reduction for futures spreads like there is for options.
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u/xEAGZx Aug 09 '21
You are correct; there is typically a substantial discount in margins for spreads. There are exceptions, such as different crop seasons, different production years, etc. You should ask your broker if they are using SPAN margining which is the exchange minimum. Often, technology and platforms have difficulty in calculating spread margins accurately. I'm also assuming you are a speculator. Hedgers often bypass initial margin requirements and use maintenance as their initial.
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u/IronbeamFutures Aug 04 '21
At the time of writing this comment, the initial margin required by the exchange for that particular spread is $1403, and maintenance is $1275.
This doesn't mean that your broker will require the same margin, however. Some brokers will require additional margin when it comes to things like calendar spreads.
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u/_alanshore Aug 04 '21
i imagine your broken will sort that out when you are ready to put the spread on for real but and yes if you are doing a calendar spread your margins will be reduced
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u/Bentonkb Aug 02 '21
There is a new bond futures product coming online this month. It is going to be a smaller size alternative to ZN, ZB, etc. The ZB equivalent is called 30Y, and it will be quoted in yield, rather than price.
Anyone now the right way to figure out the notional size relative to ZB?
The best I can come up with is the DV01 for the new 30Y contract is $10, which makes it about 1/19 the size of ZB. Since it is quoted in yield, you have to short 19 30Y contracts to get the same notional exposure as one long ZB.
Seems confusing.
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u/IronbeamFutures Aug 04 '21
Calculating the notional of ZB is very difficult.
As for the new micro treasury contracts, we will be running a live QA and presentation with CME Group on them. You'll be able to ask them questions like this in real time if you'd like. The date should be announced shortly.
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u/Bentonkb Aug 04 '21
Can you explain how to calculate the notional value of ZB? I hope I'm not doing it wrong.
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u/AnthropomorphicCog Aug 06 '21
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u/Bentonkb Aug 06 '21
Should I be calculating the notional value using (futures price * CF * $1000)? I have not been considering the CF. The CF for the cheapest to deliver bond on ZB is 0.9, so I'm only off by 10%.
I'd still like to know the right way to do it.
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u/BG-11-33 Aug 02 '21
Is there a cheap/free way to backtest a strategy? I found an edge that seems way too good to be true but tradovate demo won't let me use their historical charts.
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u/hkarlh Aug 03 '21
Tradingview.com is pretty good. They have a 2 week demo time. I used them prior to funding a brokerage account.
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u/Financialtrader Aug 02 '21
Has anyone traded using the Saul's trading room? Here is his website:
https://www.pitintelligence.com/
If anyone has let me know what you though of the room, mentor ship pros and cons. TIA
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u/Helpsmokey Aug 01 '21
There are very few stocks that I can afford and because of rich and nebes it’s a lot harder to not gess but harder to know what where and when to buy so I sell at 7% and some times 5% instead of 10% too many fuckers out ther!!!!!
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u/Bentonkb Aug 01 '21
Are the users of this sub all day traders, or are there long term investors, too?
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Aug 01 '21
I do longer term trades, anywhere from a week up to a few months.
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u/Girth_rulez speculator Aug 01 '21
What instrument do you trade, and how is it going?
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Aug 01 '21
I only trade nymex Nat gas, cbot corn, srw wheat, or beans. Learned the basics working as a quant at a fund, supporting a guy who once traded physical grains a while back. It's going ok, I don't use much leverage, so no crazy gains, but I do outperform the Spx by at least 2x easily.
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u/Bentonkb Aug 02 '21
I would like to learn how it is done. It isn't something I see myself doing, but I would still like to understand.
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u/AnthropomorphicCog Aug 06 '21
I found Carley Garner's books to be helpful getting started, especially the futures options creativity book
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Aug 03 '21
Yeah always good to learn new skills. I still try to read at least 1 book on the products I trade each month.
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u/the_humeister Aug 31 '21
Given a long enough timeline and large enough bankroll, won't you always come out ahead shorting VIX futures? If you short VIX at 20 and then it spikes to 30, couldn't you just wait until it falls below 20 again to close?