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Trading the new CME E-Micro's (E micro) MES, MNQ, MYM, M2K and other micros


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Trading the new CME E-Micro's (E micro) MES, MNQ, MYM, M2K and other micros

  #111 (permalink)
 
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 josh 
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SMCJB View Post
I've been thinking about this some more. I suspect the profile of a person trading the micro's is somebody who has a small account size and is probably paying higher clearing fees. While the exchange fees may be proportionally lower, paying the same clearing fee on a contract a 1/10th of the size will have a significant impact. If you look at the table below, eMini's even at high retail rates are less than double* the cost of trading the full size contract, but Micro's are over 5x the cost. Trading the Euro Micro, M6E, If your paying $1.50** in broker clearing fees then that will be $1.68 per side or $3.36 per round turn. With a tick size of 0.0001 or $1.25, that's equivalent to 2.688 ticks. In comparison a member with good clearing fees is probably paying about $1 per round turn to trade a full size, which is just 0.08 ticks!



* With the exception of QG which is worse due to the eMini being a 1/4 the size rather than 1/2.
** Not uncommon. $1.50 is Tradestation's base rate for less than 300 contarcts a month.

The point of trading micros would only be to add more realism than Sim. You will never make money trading them, and if you are, it means you should be trading ES, *given a proper account size*. The benefit is to the new trader who thinks equity indexes looks easy, and quickly finds out what being taken to pound town feels like It hurts 10x less, and provides learning at smaller cost than the regular minis.

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  #112 (permalink)
 
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 srgtroy 
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josh View Post
The point of trading micros would only be to add more realism than Sim. You will never make money trading them, and if you are, it means you should be trading ES, *given a proper account size*. The benefit is to the new trader who thinks equity indexes looks easy, and quickly finds out what being taken to pound town feels like It hurts 10x less, and provides learning at smaller cost than the regular minis.

One exception may be using them to swing trade the SPX instead of SPY options. You can place overnite stops and not have to deal with any of the option greeks. This in the case where you have a big enough account to day trade the ES but not swing trade it or you want to practice swing trading it before you engage.

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  #113 (permalink)
kazz
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FuturesTrader71 View Post
I'm personally very glad that this has been public. It has been hard biting my tongue for a while while this was being developed. I think this will save many traders from blowing up. I really have wanted a product for about 10 years and met with them 6 years ago to start the push for this. It will be worth it and I think it will be a successful product.

At the end of the day, my focus and effort is directed toward having as many traders get what they need in order to succeed in futures as possible.

Thanks very much for pushing for this, as you say it will prevent many small accounts and newbies (like myself) from blowing up.

My worry on these new micro contracts is the issue of volume and liquidity. I'd be really interested to know your thoughts on this? Thanks.

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  #114 (permalink)
 
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 bobwest 
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SMCJB View Post
I suspect HFT will ensure the liquidity is there. The order flow, and tick to tick pricing, will be completely different though. You will need to watch the eMini chart but actually trade the Micro contract same way as people do with QM (Crude eMini) and CL etc.

There probably will be liquidity enough, although there will probably be relatively less and so one would expect more slippage, etc. But probably the benefit of trading the micros would be to just be in a live market with some real money at stake, but not much. You won't get rich but you will get some experience, and may make a little (and only lose a little. )

The method of trading the micro by using the larger-size mini chart for decision-making, but actually executing on the micro, seems to work well for traders of other micros.


josh View Post
The point of trading micros would only be to add more realism than Sim. You will never make money trading them, and if you are, it means you should be trading ES, *given a proper account size*. The benefit is to the new trader who thinks equity indexes looks easy, and quickly finds out what being taken to pound town feels like It hurts 10x less, and provides learning at smaller cost than the regular minis.

This may be a huge deal for traders who have never had the sudden and abrupt learning experience of getting their heads bashed in by ES. They'll get some of the same with micros, but it will cause less harm, and you've got to get it sometime in order to be at all realistic in your view of trading.

Also, note that the other minis (YM, NQ, and whatever they're calling Russell nowadays ) will also be micronized. The tick values of those are all going to 50 cents, from $5.00 (ES is going to $1.25 from $12.50). So there will be a bunch of alternatives, depending on the market you like.


srgtroy View Post
One exception may be using them to swing trade the SPX instead of SPY options. You can place overnite stops and not have to deal with any of the option greeks. This in the case where you have a big enough account to day trade the ES but not swing trade it or you want to practice swing trading it before you engage.

Yes. Trading SPY can give you unexpected and unwelcome (and sudden) side effects, like being right about the trend, and still lose out due to option premium decay. It's much better to just sidestep all that.

Altogether, a good change.

Bob.

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  #115 (permalink)
 
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if the liquidity and vol is similar to the ES/NQ&RTY this could be great!

-P

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  #116 (permalink)
 
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 wldman 
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@MiniP the volatility will be the same as any discrepancy would be an arbitrage opportunity and hence stripped clean in an instant. Sans arb, the micro contract will be nearly 100% retail. It will offer participation to people that would otherwise not trade the mini due to margin requirements or funding issues. I dont think the volume will be significant enough to benefit the mini in that the absence of the smallest retail participants wont have an impact. Liquidity will be a forced march as any misprice will be scraped off the table...likely by algos that are already written and tested.

If new people can participate and gain an opportunity through the new product, that would be great. If the fees generated move the needle, CME will get what they want. My view would be the micro will have little impact.

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  #117 (permalink)
 
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wldman View Post
@MiniP the volatility will be the same as any discrepancy would be an arbitrage opportunity and hence stripped clean in an instant. Sans arb, the micro contract will be nearly 100% retail. It will offer participation to people that would otherwise not trade the mini due to margin requirements or funding issues. I dont think the volume will be significant enough to benefit the mini in that the absence of the smallest retail participants wont have an impact. Liquidity will be a forced march as any misprice will be scraped off the table...likely by algos that are already written and tested.



If new people can participate and gain an opportunity through the new product, that would be great. If the fees generated move the needle, CME will get what they want. My view would be the micro will have little impact.



I haven't looked at the margins what are they gonna be ? ES right now is 500 intra day isn't it?

-P


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  #118 (permalink)
 
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 bobwest 
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MiniP View Post
I haven't looked at the margins what are they gonna be ? ES right now is 500 intra day isn't it?

-P


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There is no exchange-set intraday margin on anything. It is up to your broker. There are brokers who have offered, as I recall, $300 ES intraday margins. (They are fishing for inexperienced optimists, but that's another story.) Generally, brokers seem to like the $500 number, but they don't have to.

The exchange only sets "overnight" margins, which apply if you are holding after the close.

Probably the micro margins will be significantly lower both for intraday and overnight. I didn't see if the exchange has set the overnight yet (they may have). Brokers haven't weighed in yet either for intraday as far I can tell.

Bob.

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  #119 (permalink)
 
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bobwest View Post
There is no exchange-set intraday margin on anything. It is up to your broker. There are brokers who have offered, as I recall, $300 ES intraday margins. (They are fishing for inexperienced optimists, but that's another story.) Generally, brokers seem to like the $500 number, but they don't have to.



The exchange only sets "overnight" margins, which apply if you are holding after the close.



Probably the micro margins will be significantly lower both for intraday and overnight. I didn't see if the exchange has set the overnight yet (they may have). Brokers haven't weighed in yet either for intraday as far I can tell.



Bob.



Hmm I'm gonna have to look into this, if the debut date is in may and march is half over seems like brokers would want to start advertising. This just seems very forexish to me.


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  #120 (permalink)
 
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MiniP View Post
I haven't looked at the margins what are they gonna be ? ES right now is 500 intra day isn't it?

-P


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I have no idea what margin req is for a one lot ES. Last time I had a margin call was Mid Sept 2001 when the Fed did that intraday surprise rate cut.

No offense to anyone, but if one of your questions for a broker is what is your minimum margin intraday or over nite on a one lot you should not be trading futures. Unless the answer you are seeking is a high number because you like your deposit well protected...but in that case you know not to ask.

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