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How to Hedge E-mini on Small Account (Newb)


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How to Hedge E-mini on Small Account (Newb)

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  #1 (permalink)
Regina, Saskatchewan
 
 
Posts: 4 since Mar 2020
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Hey All,

I am waiting for my funds to be transferred to my new IB account in the coming days. I am new to futures trading.

With the markets tanking, I really want to sell an E-mini S&P and watch it run.

I think that even 1 day of tanking like this and I would have $$$ from shorting the E-mini.

The issue is that I have a very small account, and if it rips against me I will be wiped out in an instant.

Is my only option to stick with one or more micro E-minis?

Are there any other hedging solutions you experienced traders can suggest in case I put on my short position just before one of the 1000pt up days and get a margin call?

I want to make $$$$ from this selloff. I don't want to get wiped out. Solutions???

Thank you to all who answer.

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  #3 (permalink)
Boise, Idaho/USA
 
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Just to make sure I understand the question. You want to start trading an extremely leveraged product during one of the three most volatile periods in the last 100 years and you want to limit your risk. If that is correct then you should get into a different product. The 3x etfs do not require a minimum of $12,000 per contract. And they do not lock up with the futures market. Another method is to buy current month options contracts because your loss is limited to 100% of your investment. With a futures contract in a violent market your loss can exceed your account balance. Why, because just because you say get out doesn't make it happen so you can be dragged for several points if you are at the back of the line. Good luck.

By the way you may want to install the spot light ATR so you can see in dollars how big the average move is.

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  #4 (permalink)
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CanadianGod View Post
Hey All,

I am waiting for my funds to be transferred to my new IB account in the coming days. I am new to futures trading.

With the markets tanking, I really want to sell an E-mini S&P and watch it run.

I think that even 1 day of tanking like this and I would have $$$ from shorting the E-mini.

The issue is that I have a very small account, and if it rips against me I will be wiped out in an instant.

Is my only option to stick with one or more micro E-minis?

Are there any other hedging solutions you experienced traders can suggest in case I put on my short position just before one of the 1000pt up days and get a margin call?

I want to make $$$$ from this selloff. I don't want to get wiped out. Solutions???

Thank you to all who answer.

Well, I don't want to be unnecessarily discouraging, but the odds greatly favor you simply blowing up your account. Sorry for the news.

Why do I say this? Many experienced futures traders will face difficult times, and many will simply sit things out. Traders who are new to these kinds of instruments should be extremely cautious, to the point of staying out, at least for now.

Just how it looks to me. You, of course, can and will make your own decisions. I do hope that whatever you decide works out well. But think carefully about the level of risk these markets, in these times, are presenting you. You are correct in thinking that you could really clean up if all your trades do well. But the market does not usually hand out rewards all that freely.

Good luck, but consider the odds very carefully.

Bob.

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  #5 (permalink)
the coin hunter
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CanadianGod View Post
How to Hedge E-mini on Small Account (Newb)

you hedge by long 1 instrument and short 1 instrument

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  #6 (permalink)
Legendary Market Wizard
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Buy a put option instead of selling futures. You will not make as much, but your downside is limited.

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  #7 (permalink)
Legendary Market Wizard
Linz Austria
 
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In my opinion the problem for a beginner in the current markets is:

The market will move against him one day or the other. He will panic and liquidate with a loss.

Thus, it is essential (not only for beginners) to keep the lot size very small in relation to the account size to be able to ride out fluctuations.

Good luck !

Best regards, Myrrdin

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  #8 (permalink)
Market Wizard
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That you’re focusing on how much money can I make and not managing risk pretty much tells us all we need to know about how this will turn out. Your money will end up being a charitable donation to more experienced, better capitalized traders. I assume you’re talking about trading the full sized ES contract. Try a micro or two instead. Think about how much can I lose, not how much can I make.

Money make ya handsome
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  #9 (permalink)
Regina, Saskatchewan
 
 
Posts: 4 since Mar 2020
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Thanks again to all who commented. The very fact that I am asking these questions should show that I am learning as much as I can about the risks prior to doing any actual live trading.

But what about a synthetic put:

carleygarnertrading.com/learn-to-trade-commodities/commodity-option-strategies/386-how-to-create-a-synthetic-put

(I had to edit the URL because I am so new on this site they won't let me post links yet.)

??? I am going to test it with paper soon.

I am aware that the call option would be both expensive, and I don't think it would move in sync with the futures contract... therefore if the market went way up and the futures contract ripped against me the protective call would only protect me for so long and I could still have a margin call. (Even though I think the call option would still be equal to the futures contract when it is at full delta on expiry.)

This is exactly what I had in mind when I asked the question in the original post: I want to sell a futures contract and buy some hedge to protect in case it rips against me...

And don't worry, I am not going to blow myself up. I am just asking to test out a hypothetical and discuss the risk structure here. I think that it is a healthy discussion if I can get answers with more structure than "don't do it..."

I want to learn about the *technical* reasons about why this wouldn’t work, why it is a bad trade, or how it could be done better.

Thanks again!

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