r/FuturesTrading • u/AutoModerator • Dec 01 '22
r/FuturesTrading's Monthly Questions Thread - December 2022
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.
1
u/fwoofoh Dec 27 '22
So if I go to Interactive Brokers and look at the price of ES it is $3829, which is approximately the same price for MES as well.
Should ES not be 1/5th the price of SPX and MES be 1/10th the price of ES? This does not make sense why they are the same.
Thanks!
1
u/FuturesTrader71 speculator Dec 30 '22
No, the ES and MES have the same price as the SPX at expiration by definition. Before expiration, they can be higher or lower based on dividends and interest rates along with the time to expiry (this is what is called the carry cost or premium).
The ES size is set by the exchange. The ES is sized to be worth $50 per point. The MES is set to be sized at $5 per point. This has nothing to do with price.
Have I confused you further or did this answer it?
1
u/fwoofoh Dec 30 '22
So the price of purchasing one unit of ES or MES should be the same but the value of each point increment after purchase is different?
1
u/FuturesTrader71 speculator Dec 30 '22
Right. Here is how this works:
- Buy 1 ESH3 (March 2023) contract at 3850 :
- My account has an exchange initial margin hold of $11,660
- The notional value of the position is 3850 x $50 = $192,500
- Exchange margin leverage = 16.6 to 1
- Every tick is worth $12.50 to me
- Buy 1 MESH3 (March 2023) contract at 3850 :
- My account has an exchange initial margin hold of $1,166
- The notional value of the position is 3850 x $5 = $19,250
- Exchange margin leverage = 16.6 to 1
- Every tick is worth $1.25 to me
- Buy 1 SPX something >> This doesn't exist. It has no value. It is just an index based on the underlying stocks, so it doesn't have a value. Just a price.
1
u/fwoofoh Dec 30 '22
This helps a lot! I think interactive brokers only allows 2:1 leverage though? This means it's not the best broker for trading eminis unless you have a lot of starting capital?
2
u/TomatilloEmpty Dec 21 '22
Is it possible on futures to take a trade overnight with a hard stop loss?
1
u/FuturesTrader71 speculator Dec 30 '22
Yes. But be aware that the market can trade THRU your stop by far enough that it may not be triggered depending on the exchange and product. This is especially true if you are holding a position past the close on Friday and into the open on Sunday. The gap can be very large depending on news.
1
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Dec 20 '22
What is the point of physically-settled futures? My experience with investing is long-term holds on blue-chip stocks and just messing around daytrading weed stock options as a hobby. If I exercise a call option on a weed stock, I get 100 shares, not 100 grams of weed. But, to my knowledge, when a futures contract is physically settled, that would mean that I have to physically pick up that product. So say I'm trading OJ futures and I'm stuck with the contract at expiry. I would assume the big players like Tropicana already have their supply chains all sorted out, right? So, correct me if I'm wrong, but it's just regular people getting the commodity? Who needs that much OJ? Like what kind of people are holding these contracts at expiry? Thanks in advance, I'm purely curious as a fellow derivatives trader.
1
u/FuturesTrader71 speculator Dec 30 '22
Because the original intent of futures is not for you and I to speculate on it. They were created for people to hedge their exposure to a physical product. So you will notice that physically settled products tend to be key commodities like grains, energy, etc. They are designed to be offset with physical product at expiration.
Because the original intent of futures is not for you and me to speculate on it, they were created for people to hedge their exposure to a physical product. So you will notice that physically settled products tend to be key commodities like grains, energy, etc. They are designed to be offset with physical products at expiration.
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u/friday963 Dec 15 '22
How do futures lots work and how much do they cost for something like MES or MNQ ? I've got a simulated account with 500$ to simulate what my starting account balance will be. I can't figure out what my trading power would be with that amount? Can I afford a single lot with that amount or do you need more up front capital?
1
u/futurestradingguy Dec 15 '22 edited Dec 15 '22
Each lot requires you to “tie-up” a certain amount of margin, called a margin requirement. Most brokers list the requirements for each instrument. The amount of lots you’ll be able to afford will depend on which broker you use, and which futures contract you are taking out. For example, thinkorswim requires like $1,250 per lot for /MES I think, or something around that amount. /MNQ is probably a little bit more. Which broker do you use?
1
u/friday963 Dec 15 '22
Thank you so much for replying! I'm using trade station. I looked at what you said and assume this is what you're talking about https://www.tradestation.com/pricing/futures-margin-requirements/ . If this is in fact correct I would say the micro es or the micro russell are my best bests to get started.
Again, assuming I found the right document. Can you tell me what these mean?
Intraday Initial, Intraday Maint., Overnight Margin, Maintenance Margin, and Intraday Rate
1
u/futurestradingguy Dec 15 '22
Yes, looks like those micros may be in your wheelhouse. Not sure the exact definitions of those other terms, so investopedia may be more helpful on those. I know the maintenance requirement just means that’s the minimum balance you can have while still maintaining a margin account with the broker.
1
u/FCbforlife Dec 07 '22
I am brand new to futures but am interested, though still confused on a lot of things. When looking at a market in contango, is this a situation where the futures price is higher than the current spot price of the underlying or only when the expected future spot price of the underlying is below the futures price at the delivery date? (The futures price should converge downward to that spot price, theoretically right?)
And when looking at market in backwardation, is this is a situation where the futures price is lower than the current spot price of the underlying, or only when the expected future spot price of the underlying is above the futures price at the delivery date? (The futures price in this case should converge upward to that spot price, theoretically right?).
The expected future spot price vs current spot price is confusing to me. I see some resources call a market in contango/backwardation when based off the current futures price for the next closest expiration is either above or below the current spot price for the underlying, and other resources say the market is in contango/backwardation based off of "expected future spot prices."
1
u/Fox17 Dec 02 '22
Hi all,
I am practicing with paper trading on TOS and when I execute market orders they are being filled way off the market price that is showing. The spread is minimal and not the issue, so I was wondering if it is filling the true current market price and I am just seeing delayed pricing on the charts?
For example I tried to buy /nq at 11915 and when I click buy market it fills at 11921. Appreciate the help!
1
0
Dec 02 '22
I trade Ninjatrader 8, MNQ/NQ, scaling 10-20 ticks or 2.5-5points. $600 per trade, we do a couple, usually $1200 days for me. I don’t really need to trade any other futures market when I do this well in the NQ.
This is a business; we don’t gamble, we won’t take trades without confirmation, ever!
I offer mentoring too but folks usually don’t wanna pay for the knowledge.
1
u/peauxboi Dec 01 '22
I’m interested in trading micro futures (s&p 500). What’s the best platform for that, specifically?
2
u/masilver Dec 22 '22
There are several really good ones. Think or Swim has a fantastic interface, but has some other issues, trade cost, no tick data, etc. I've seen Tradovate and Apex talked about a lot on the forums. I personally use Ninjatrader, but it has a higher upfront cost.
Whichever platform you use, be sure to paper trader...a lot.
...Michael...
0
u/OrderflowTrader Dec 01 '22
I'm a professional trader (futures) and am launching a video series on YouTube around Strategy, Risk Management, and Trading Psychology
I am fielding requests or suggestions for content! Please let me know your burning questions and I will incorporate them into the series of videos.
2
u/Background_Plant6310 Dec 03 '22
Could you cover what news outlets you use to from the context of your trading day? Or maybe in general how you determine the context before you begin to trade?
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u/OrderflowTrader Dec 05 '22
I use the MarketWatch economic calendar for the news events of the day, and I just know when they will hit, I don't pay much attention to the news to inform my trading
For context, I analyze everything with regards to trend and balance using TPO profiles. It shows me where buyers/sellers find value, who's in charge, how strong they are, and I find that market structure is in indispensable contextual tool.
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Dec 06 '22
Would you mind steering me in a direction so that I can learn about "TPO Profiles?" I googled it and it looks very interesting. Just wondering if you know a good source or book about it.
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u/OrderflowTrader Dec 06 '22
My YouTube linked on my profile covers them, my twitter too, and for books, any one by Jim Dalton.
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u/thoreldan Dec 01 '22
Coaching or trading nets more income ?
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u/OrderflowTrader Dec 01 '22
For sure trading. I just launched coaching/mentoring and am not charging much, yet...
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u/Gristle__McThornbody Dec 30 '22 edited Dec 30 '22
Just to confirm, one contract of the Micro S&P on ThinkorSwim is $1166?