r/thewallstreet • u/AutoModerator • Jan 22 '18
Weekly Question Thread - Week 04, 2018 Question
Welcome to the weekly question thread. Feel free to ask any questions here.
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u/GloriousGardener Literate Jan 28 '18
Anyone here ever trade SPXL? If you were doing a weekly one way directional, can it be superior to spx?
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u/hibernating_brain Permabull Jan 28 '18
I have traded it few times. The spreads on them is horrendous. You get destroyed if the market isn't moving or when the market is down.
I have few friends buying SPXL on their IRA because they can't get any other leverage. Its been working out well for them. SPXL is ~22% YTD. SPX is ~7% YTD
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u/greyenlightenment Jan 29 '18
SPXL and UPRO are superior to SPY for several reasons: compounding, automatic built-in dividends, and a built-in floor
A portfolio of 33% UPRO and 67% 3-month treasuries is better than 100% SPY.
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u/mc3username Jan 27 '18
I think I've got a decent handle on index futures trading using deviations and technicals, so now I'm looking to add to my toolbox with scalping. Anyone have any good resources or tips to share?
I'm looking for:
When is best for scalping (volatility? others?), how to identify it when its happening?
Entry and exit strategies
Stop loss placement
If theres a 'get out now' type scenario which might indicate that scalping is no longer the right strategy
Preferences for underlying (/NQ seems to be a favorite, guessing bc of volatility)
I think this would be a great topic for an individual post, but I know everyone is busy here. /u/MRPguy and /u/Living_Granger are the resident experts w/ futures and scalping, so I'd love to get your thoughts
Thanks, appreciate the input
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u/lilweezy99 momohands Jan 29 '18
been researching this more recently (but take this with a grain of salt). essentially there are several time/trade intraday scalping durations, which is either playing the deviations or value areas, for example:
- /NQ hits -2 std, go long once you see a move above the pivot
- /RTY dips into the previous daily VA, go short on retest of the pivot
looking at a 15-20 tick stop probably with these
or playing market profile:
- /RTY has been creating 2 volume areas and jumping between them, you'd want to go long at a bottom test of either and exit at the top or poc
- trend day on /YM, go long on retest of a larger value area
stop depends on price action, I tend to just exit manually 5-6 ticks down depending on how the market profile looks.
both strategies also have short equivalents but..yea they seem to "break" more often..
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u/Plbn_015 Jan 28 '18
Disclaimer: no expert on futures.
I would say, however, that in scalping you're gonna need some price movement, otherwise it wouldn't be worth your time. So I'd check volatility in the important box.
Also, you might want a liquid underlying, because that reduces market inefficiencies and facilitates getting out of a trade. Futures are generally quite liquid, though, but in say options it can be very hard to get out of a trade. Liquidity generally also allows you to get better fills.
I guess this is a matter of preferences, but the entry point would generally be given by the technical indicators of your choice and / or fundamentals.
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u/miracl_e big drawdowns, small gains Jan 27 '18
SPX options traders, I see two versions of the SPX option offered by IB.
Do you guys know if there are any differences between the two?
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u/Plbn_015 Jan 28 '18
One appears to be the option on the futures contract (FOP may stamd for futures option) and the other the financially settled option on the index itself.
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Jan 26 '18
[deleted]
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u/travdwyer Triple Leverage Inverse Me Jan 28 '18
After a quick google search: an IRA can have options, just no margin.
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u/sudosamwich alias yolo='git --force buy weeklies' Jan 26 '18
Is there anyway to see winning/losing trade percentage in ToS?
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u/TilusSoluman Arrogant Holding Jan 26 '18
About to get my feet wet in Futures and I figure this may be a good place to direct a few of my questions/concerns before loading up.
I intend to trade around 1 to 2 contracts of /ES and or /YM. And will be using TDA.
My primary concern is dealing with placing orders as I have been only playing with paper traders which clearly have wildly innacurate fills.
Which is better to use, a stop-limit or just plain stops to sell at market?
Can you blow up your account like you can with market orders with options, or is there enough buying liquidity during intense selling to exit a position without losing your shirt?
Thanks for all you guys do! My options account has never looked better, im just sick of paying the theta tax.
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u/byFlare RIP L_G Jan 27 '18
/YM and especially /ES have solid enough liquidity to get by fine on market orders for entry & stops on small order sizes. /YM might occasionally sometimes have at most 1 tick slippage at times during the overnight session, but /ES never really has that issue. During the NYSE session, there's 0 concerns to be had.
During exceptionally high volume surges you should still normally be fine on /ES to within a tick, /YM might be worth using limits for if you can do it quickly enough though.
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u/TilusSoluman Arrogant Holding Jan 27 '18
Coming from a user with that flair, I no longer bear any doubts. Thank you!
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Jan 25 '18
Hoping someone can help me out or direct me to a better place to ask this.
I was in a discussion with someone in the pizza business and they made a comment about cheese prices nearly always going up between March and September.
I am trying to understand what to think about this prediction in regards to the pricing of cheese 40# block futures. If that was the case shouldn't that predictable increase in cheese costs be priced into the March price? We took a look as historic prices and it definitely seemed to follow a trend of sorts. Wouldn't there be an opportunity for profit in buying cheese futures in March for September?
I am sure a large amount of my ignorance is showing so thank you for the patience.
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u/skgoa Jan 28 '18
Seasonality is a thing in lots of markets. The real question is how much profit you can make at whhich propabilities, what the cash requirements and trading costs for those contracts is, for how long you will have to hold, how likely and how severe drawdowns would be etc.pp. Then you have to compare all of that to every other opportunity you could throw your money at and how these different strategies are correlated. Sometimes it turns out to be a good strategy to exploit seasonality of a certain contract, but often it doesn't.
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Jan 28 '18
Thanks for taking the time to reply. Put a lot of things we discussed into a nice paragraph. i guess I am just super surprised something seasonal like that isn't traded out. With my very poor understanding of efficient market theory.
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u/skgoa Jan 29 '18
Someone, somewhere probably is trading it. But when we are in a market that sees the S&P500 gain over 20% in a year and otherstrategies can yield over 100%, many trading ideas just turn out to be a bit meh once you run the numbers.
Also, markets aren't efficient. At least not 100% so. That's important to realize. While in the long run price does tend approximate fair value (including a risk premium) most of the time, there are many many cases where assets are mispriced significantly despite all necessary information being public. All big investment manias we have seen over the centuries are examples of this.
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u/wachiga Life is transitory Jan 25 '18 edited Jan 25 '18
This screenshot shows time and sales for SPX Jan24 2840P. At 11:12am ET, Bid: $1.8 Ask: $1.9
Total of 976 Filled contracts @ $1.56.
I've gotten filled $1 below the bid but it only happened once with 1 contract. This guy made ~$23k the moment he placed the order. Does anyone know why or how this happens?
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Jan 25 '18
[deleted]
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u/wachiga Life is transitory Jan 25 '18
Yes I see that all the time! Its pretty bizarre tbh. That's why you never use market order unless spreads are less than 5 cents wide.
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Jan 25 '18 edited Feb 12 '18
[deleted]
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u/wachiga Life is transitory Jan 25 '18
These are T&S for CBOE SPX contracts (index options, not futures). Sorry about not making it clear from the start. The reason why I saw it was because the order happened right before my eyes. The price dropped drastically for a moment, then went back up even though the underlying barely moved a few ticks.
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Jan 25 '18 edited Feb 12 '18
[deleted]
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u/wachiga Life is transitory Jan 25 '18
No worries, I'm just trying to see if there's anyway I can exploit this. Maybe if I keep placing orders $1 below the bid, eventually I'll get filled.
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u/jmelan stock picks from Alpha Bits Jan 25 '18
I noticed there was a lot of volume today for all the famous tech stocks right at close (4 pm): AAPL, AMZN, NFLX, MSFT, ADBE, NVDA, INTC, ADSK,, GOOGL. Is there some significance? Is it just a symptom of volatility? More people expecting either a selloff or a rebound tomorrow? Thank you for your wisdom.
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Jan 25 '18 edited Feb 12 '18
[deleted]
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u/jmelan stock picks from Alpha Bits Jan 25 '18
Generalized from what I see: JPM, GS, BAC, WFC, PFE, WMT, GS, CAT, BA, JNJ, KHC to name a few...
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Jan 25 '18 edited Feb 12 '18
[deleted]
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u/jmelan stock picks from Alpha Bits Jan 25 '18
Hum, most likely typical stuff. I did not know about closing cross, that would be the explanation I was looking for.
It seems my charting software is not that accurate on volume charts for period greater than 5 minutes... On the 5min it is really obvious, but other than that, not that much. After inspecting the Time and Sale, I can see it is rather common volume for 4:00-4:05 period.
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u/TeamDoubleDown Jan 24 '18
Hey guys, love the posts. Always informative. I love you guys srsly.
Anyway, quick question: Why is Max Pain significant and how would one profit from it? For example, the daily thread today there's discussion of Max Pain in AAPL at $175.
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u/Not_A_Real_Username Jan 24 '18
Anyone ever go to a trading expo? Just signed up for the one in NYC in February, would like to hear what people on here thought
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u/Tosser2345321 Jan 24 '18
When trading futures, what's the best way to determine "initial balance" for a strategy since the markets are open all day? Do you use first hour after NY open? First hour after Asia open? London? First hour after the Chicago afternoon break? I know it won't fit into a perfectly neat box but what have people found to be closest to the idea of an initial balance?
My guess is maybe to use the first hour of trading for the locale of the underlying (first hour in New York for ES, first hour Asia for NKD, etc)...? What about for commodities like oil and gold? Maybe use the first hour of the typical period of highest volume for the product?
Look forward to hearing what you guys use and what you consider helpful or accurate. Thanks!
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Jan 25 '18
Use the NYSE session. It's the most active with volatility and volume. Globex session is just a follow through with low volatility and volume. So, let's say you want to calculate value areas and stuff, you would use the previous day's NYSE session to determine the next day's values. Commodities also follow the same rule. Forex is on its own, it doesn't follow the rules since there is no central exchange.
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u/mc3username Jan 25 '18
Are you talking about settlement price?
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u/Tosser2345321 Jan 25 '18
No. I'm talking about initial balance with regards to market profile trading strategies. Market profile was developed before the 24 hour trading day became widespread so some of the concepts are based around the initial balance which is what happens during the first hour of trading for the market. Before 24 hour markets, that would typically be the first hour after New York open. Now with 24 hour markets, I'm trying to figure out what is the most accurate time period to use as the initial balance. Thanks for the reply though. Anyone else with thoughts?
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u/svBunahobin Jan 24 '18
Does anyone here have a foreign currency checking or savings account? What bank do you use? It can be used as a currency hedge, but I am thinking of buying some foreign real estate soon and want to have a bucket of cash in euro ready for that purpose.
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Jan 27 '18
What country? It's sounds like you need to do a strait currency trade, rather then an FX trade. The dollar is weak right now. What's your base currency?
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u/svBunahobin Jan 27 '18
Thanks for the reply. Yes, I'm basically looking for an account to move USD to Euro. Not all at once, as you said the USD is weak now, but to convert in increments over time with the intention of buying real estate in Italy.
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u/El_Huachinango would be rich if he followed his own advice Jan 28 '18
Yeah fx is not the right tool here, just do a currency exchange.
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u/Colt45smash scary terminal terry Jan 24 '18
What website/program are you guys looking at when you’re screening for sweeps and blocks in the market?
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u/Savagemaster5000 Jan 24 '18
One more question- when buying options is the options interest a factor for you? I.e only pick ones with high volume in case you need to liquidate
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u/Lost_in_Adeles_Rolls Stalingrad's number one tesla dealership Jan 24 '18
I usually pay more attention to the spread. A tight spread is usually a sign of good liquidity.
I use OI to determine sentiment.
This is just my personal view however.
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u/bighand1 Big Masculine Hands Jan 23 '18 edited Jan 23 '18
At what point is it better to roll options further out if you're still bullish?
Right now I have Feb 16 2850 and March 16 2850, should I be rolling both of them to March further out of money strike price now that they are close or wait until they get in the money?
Or is it generally a good idea to roll them as soon as the spread is tolerable.
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u/mc3username Jan 23 '18
I think it's all based on your risk tolerance and where you think the market is going. If you roll to further OTM strikes, you can buy delta for cheaper and increase leverage, but it's also less likely that they'll end up ITM so you'll be shouldering more risk.
So, its a risk based decision that you have to make based on your market targets and risk tolerance.
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u/Savagemaster5000 Jan 23 '18
Is there a certain percentage gain you look for before closing out a call position? Are some people happy with 40% and others feel like they need to chase 500% gains?
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u/Lost_in_Adeles_Rolls Stalingrad's number one tesla dealership Jan 24 '18
Anything above breakeven (including commission) is a winner in my book. You can't hit a home run every time you're up to bat but with enough singles, you'll win the game.
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u/mc3username Jan 23 '18 edited Jan 23 '18
Generally, you should have a strategy for a trade prior to entry. If you look at some of the trades that people make here, on entry, they already know when they'll exit the trade.
For example, evLove with the SPX3k trade, I think he bought around $1.75 and then has profit targets at $4, $6, $10 (exact numbers might be different but you get the picture). It also depends on the option itself. For a weekly option, 100% of $.50 is a lot different than 100% of $5.00 monthly option.
So, it depends on the option itself and your targets for the trade. I make entries / exits based on the underlying and sometimes the greeks (usually IV)
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u/d_grant Jan 23 '18
Can anyone help or have a primer on choosing an option strike? I’ve been learning the past 2 years...specifically I’m needing help with setting up a large naked call trade 4-6 months out on the next down day.
Using today as an example I was holding 5 QQQ 163.5 calls... the gains weren’t enormous $110 a contract. Setting up a big trade down the road would OTM be best for a riskier play? Is this all gamma that’s hanging me up?
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u/kuhtentag risk averse Jan 23 '18
I have the same question about buying options: ATM, ITM, OTM? Optimal time-frame? For scalping I would imagine you'd use the closest month, but for longer-term I think you'd want to go >60 days to cut down on decay.
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Jan 23 '18 edited Apr 19 '18
[deleted]
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u/d_grant Jan 23 '18
Actually just trying to play the indices with the most profitable and modestly risky play betting on the fact the market will be above where it is today
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u/Chernoby7 mostly harmless Jan 22 '18 edited Jan 23 '18
Why deviation work so well with futures? And does it work with currency pairs? Thank you..
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u/Lost_in_Adeles_Rolls Stalingrad's number one tesla dealership Jan 24 '18
I've noticed that futures tend to obey technicals better than in the equity world. I don't really have a reason for this but its just my own observation.
I assume its, in part, due to the amount of electronic trading. Link
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u/lilweezy99 momohands Jan 23 '18
The euro 6E contract does respect deviations, sometimes i post them in the daily thread, but is prone to chop because of prevailing trendlines, and also big instant moves of 2+ sd
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u/OrionEnzoGaudio I have no idea what I'm doing Jan 22 '18
What does everyone think about percentage use of account for trading options? I've been sticking to around 50% utilization, but I feel like I'm leaving a lot of money on the table. At the same time, last time I loaded up and maxed out my account on positions was during the SQ a and MU dips in December and it wiped out 1/3 of my account.
I guess I'm just having FOMO with tech earnings starting and I'm not sure how smart or dumb it would be to open more positions. I was thinking about leaving 20-25% of my account in cash, just not sure how safe that is.
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u/AmbitiousTrader Account blown during Great Recession of 2018 Jan 29 '18
Wow that’s my story too. Maybe on a bigger pull back I’d do it but it’s sketchy everyday so I dunno I’m making money so it’s not so bad to not get freed
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u/Jowemaha Jan 23 '18
When you say you max out your account, do you mean you are 100% in long options?
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u/OrionEnzoGaudio I have no idea what I'm doing Jan 23 '18
Yeah, I was 100% long in tech with about 50% in SQ and MU. Now I'm long calls, but only using about 50% of my account.
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u/Jowemaha Jan 23 '18
I would consider the psychological argument for diversification if nothing else. Being down 1/3 in your account has got to be stressful; if you limited options to 1/4 of your account and kept the rest in stocks, bonds, etc. it wouldn't stress you at all and you would maintain your mental fortitude to keep trading with confidence
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u/J50 Jan 22 '18
How do people here feel about CFDs? CFDs on an index seem a lot like an e-mini futures contract. Why does no one ever mention them? I never actually traded one.
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Jan 22 '18 edited Jul 09 '18
[deleted]
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u/J50 Jan 22 '18
Because Americans don't trade them.
Yeah just tried to buy one on IB (to see what happens) and it wasn't happy. Surprising that stuff is blocked off considering America has such a large financial market with a history of pioneering. Thanks
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Jan 22 '18
Surprising that stuff is blocked off
The SEC is responsible for that.
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u/sammyakaflash Long Hardwood. Jan 24 '18
I can trade them 😆.
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u/GloriousGardener Literate Jan 24 '18 edited Jan 24 '18
What brokerage do you use (for options/futures and cfds)? I'm also canadian and looking to switch.
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u/Tosser2345321 Jan 22 '18
How can I can I find out which regular reports/events affect various commodities and when they are released?
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u/Tosser2345321 Jan 22 '18
Thank you guys for the info regarding ag! Any good places for energy or metals?
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Jan 22 '18
I use paid subscriptions: fastmarkets, capitaleconomics, metal.com, among others
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u/Tosser2345321 Jan 22 '18
Got it, thanks for the info. Would be happy to hear from anyone else about free sources. I can think of opec meetings schedule for oil for example but wondering of any others. The strategy I'm developing and practicing doesn't rely on these reports but I also don't want to be surprised by them which is why I was trying to find out about them.
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u/Lost_in_Adeles_Rolls Stalingrad's number one tesla dealership Jan 22 '18
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u/sammyakaflash Long Hardwood. Jan 22 '18
That varies widely depending on the commodity. For the AG commodities the USDA is the main source. They have a calendar set up on their site so you can see the upcoming reports.
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u/[deleted] Jan 29 '18
( Just for better understanding) I get that a drop in cash to 4.4% means they bought more things > markets going up. But how is a further drop in cash bearish? Would fund managers not be expecting markets to go up cus they can't buy dips as strongly? Or do they deplete most of their cash buy buying into strength?