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CL vs QM (crude oil) tick size/value, margins
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CL vs QM (crude oil) tick size/value, margins

  #1 (permalink)
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CL vs QM (crude oil) tick size/value, margins

So a friend (George) and I were chatting via Skype today, and it got me looking at QM (emini) again compared to CL.

I first looked at QM several months ago when I stopped trading ES and started trading CL. At that point I discarded it almost immediately because I thought it did not trade tick for tick. I was looking for an ES-to-SPY type relationship.

However, today I realized that my mistake back then was I was looking at a 6 range chart, my favorite then, and they didn't even come close to comparing (QM vs CL).

Now I know why. And I also know now that it is in fact very similar to the ES-to-SPY relationship, and does trade close to tick-for-tick.

Here is what I know:

CL - Crude Oil Futures
Tick size: 0.01 tick size, 100 ticks per point (ie: 75.00, 75.01, 75.02, 75.03)
Cost per tick: $10.00
Margin: $2,000 per contract @ Amp, although you can negotiate this down a lot

QM - Mini of Crude Oil Futures
Tick size: 0.025 tick size, 40 ticks per point (ie: 75.00, 75.025, 75.050, 75.075)
Cost per tick: $12.50
Margin: $1,000 per contract @ Amp, haven't tried negotiating it down, but sure you could

For every 10 ticks CL moves, QM moves 4 ticks (2.5:1 ratio). Those same 10 ticks is $100.00 on CL [10x$10], and $50 on QM [4x$12.50] (2.0:1 ratio). Notice the difference in ratio there.

If your account has $20,000 and you assume the above ratios, you can trade (10) CL contracts [$2,000 margin per, qty 10] or (20) QM contracts [$1,000 margin per, qty 20]. If you entered a trade that went 10 ticks on CL (which is 4 ticks on QM), you could get $1,000.00 with CL, and you could get $1,000.00 with QM. Notice it's the same.

So why trade QM instead of CL? If you have a smaller account, but you want to trade more than 1 contract so you can have an ATM, runner, etc, then QM might make sense. But if you could afford to trade the same number of contracts on CL, then CL is the more valuable (higher risk/higher reward) instrument. QM really only becomes an advantage if you can't trade multiple contracts with CL due to your margin requirements.

On a range chart, you should multiply what you normally trade on CL by 2.5 to get an approximate identical chart on QM.

I found larger charts, like a 5m chart, to be nearly tick-for-tick identical. Since I am now trading only 5m or larger charts, personally I am content with this and didn't spend more time on smaller time frames.

Attached are some charts. QM on top, CL on bottom.

The daily volume seems to be quite different as well, as sam028 pointed out. CL traded about 280k today for instance, while QM only traded 12k. Wow. A bit scary.

Another interesting note: SPY is an ETF, which means you need 25k to day trade it due to regulations. QM is not an ETF, it's a future, so it can be traded the same as any other future.

Here are more details from CME:

Regular CL:
Light Sweet Crude Oil

Emini QM:
E-mini Light Sweed Crude Oil

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Attached Thumbnails
CL vs QM (crude oil) tick size/value, margins-cl_qm_1.png   CL vs QM (crude oil) tick size/value, margins-cl_qm_2.png   CL vs QM (crude oil) tick size/value, margins-cl_qm_3.png   CL vs QM (crude oil) tick size/value, margins-cl_qm_4.png   CL vs QM (crude oil) tick size/value, margins-cl_qm_5.png  
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  #2 (permalink)
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Mike, you failed to mention that slippage on QM can be material as the spread is often more than one tick.

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  #3 (permalink)
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Zoethecus View Post
Mike, you failed to mention that slippage on QM can be material as the spread is often more than one tick.

Very good point. I've heard this too and my opinion is that one shouldn't trade the emini. It's the same for the euro. The emini is for amateurs and as such there are probably professionals there to take advantage of them.

Also CL is the real market, QM just tracks CL so analyzing volume & trade intensity etc. is not going to be as affective. Sefstrat made a really good post about this in the particle oscillator thread.

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  #4 (permalink)
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Zoethecus View Post
Mike, you failed to mention that slippage on QM can be material as the spread is often more than one tick.

When you say more then one, are we talking greater then 2 or 3 ticks? if so, I dont like the idea of the spread. In CL I dont think I've ever had slippage. I guess theres alot of vol to justify that?

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  #5 (permalink)
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tellytub View Post
When you say more then one, are we talking greater then 2 or 3 ticks? if so, I dont like the idea of the spread. In CL I dont think I've ever had slippage. I guess theres alot of vol to justify that?

CL is one of the most liquid commodities. I rarely get slippage and it's just 1 tick. Sometimes I get slippage on the exit so it's not always a bad thing.

QM isn't even close when it comes to liquidity.

This is what I believe: Someone should not trade real money until they've proven their method is consistently profitable over several months on sim. Once you do that, you don't need to mess with QM as long as you can follow your trading method/plan. 2 months of repetition should enable one to do that. If not, trading 1-10 shares of USO is another option.

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CL slippage happened to me. And it was bad and partially my fault.

It was the inventories at 1030. I was not aware and should have flattened when I had 42 ticks in the bag. Though my stop was BE, it returned against me in the spike up and I ended up -10 ticks from my stop a BE.

Tough. Should have marked up that time and flattened.

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  #7 (permalink)
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cunparis View Post
Very good point. I've heard this too and my opinion is that one shouldn't trade the emini. It's the same for the euro. The emini is for amateurs and as such there are probably professionals there to take advantage of them.

Also CL is the real market, QM just tracks CL so analyzing volume & trade intensity etc. is not going to be as affective. Sefstrat made a really good post about this in the particle oscillator thread.

Could u give me the link of Sefstrat's particle osillator thread? many thanks.

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  #8 (permalink)
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https://futures.io/elite-circle/659-d9particleoscillator.html

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  #9 (permalink)
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CL vs USO (United States Oil Fund LP, ETF ):
- cheap: 1 tick -> 0.01 $ (1$ for 100 shares)
- enough volume -> 13.000.000 shares/day
- no slippage
It needs nice moves for being interesting (commissions), but maybe a good choice for testing something with a CL-like underlying (without the heat of 10$/tick).
And it's always easier to have a smart MM/position size when you trade with 20 X 100 shares than 2 X 1 car (in fact 1 CL == 2000 USO).

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  #10 (permalink)
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sam028 View Post
CL vs USO (United States Oil Fund LP, ETF ):
- cheap: 1 tick -> 0.01 $ (1$ for 100 shares)
- enough volume -> 13.000.000 shares/day
- no slippage
It needs nice moves for being interesting (commissions), but maybe a good choice for testing something with a CL-like underlying (without the heat of 10$/tick).
And it's always easier to have a smart MM/position size when you trade with 20 X 100 shares than 2 X 1 car (in fact 1 CL == 2000 USO).

Good analysis Sam. I don't know if USO is as volatile as CL, but if you want to trade CL on the cheap then USO seems like a good choice. I'd also say that if doing stocks one shouldn't limit it to USO. Lots of volatile stocks to daytrade. I used to daytrade BIDU, it was so expensive it had a big spread and during churn bars I could often buy 100 shares at the bid and immediately sell them at the ask.

One disadvantage as someone may have mentioned is the 25k day trader rule. Isn't it crazy the government forces under capitalized traders to trade futures??

Still though, the simulator is looking mighty good. Trade oil with the big boys for free with no chance of losing.

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