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ES vs S&P Cash with Market Profile
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ES vs S&P Cash with Market Profile

  #11 (permalink)
Site Administrator
Manta, Ecuador
 
Futures Experience: Advanced
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Favorite Futures: E-mini ES S&P 500
 
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Posts: 46,240 since Jun 2009
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@Private Banker, I have a feeling we are veering off course. But, wouldn't it be common for funds to be using the December contract in order to avoid a lot of these rollover issues throughout the year? And then liquidate the majority of their position by year end, and put on new positions at the new year in the new December contract?

So if their hedge is in December contract, they would just use the current front month for the actual profit center.

Anyway, I am just guessing as I've never really thought about it, read about it in that detail, or done it myself in that way.

Mike

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  #12 (permalink)
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Big Mike View Post
@Private Banker, I have a feeling we are veering off course. But, wouldn't it be common for funds to be using the December contract in order to avoid a lot of these rollover issues throughout the year? And then liquidate the majority of their position by year end, and put on new positions at the new year in the new December contract?

So if their hedge is in December contract, they would just use the current front month for the actual profit center.

Anyway, I am just guessing as I've never really thought about it, read about it in that detail, or done it myself in that way.

Mike

Hey Mike,

Yes, we may be venturing a bit off topic but I do enjoy discussing this. In theory, I could see how that would be reasonable but this is assuming someone is just positioning long term short and that particular contract month were providing the adequate liquidity. To position long term, most funds would probably be short the ETF or through some sort of synthetic position such as a VIX strategy or options strategy. The outright futures are used more for trading around a bigger position beyond my reference of "core" or providing a portable alpha strategy to a bigger picture thesis such as having a low Beta portfolio while adding Alpha from a low correlating asset class. An example of that would be a Beta neutral fund that is adding alpha through actively managing futures from an asset class that is not closely correlated to the funds tracking Beta.

So to add to that, if you simply look at the volume occurring within each contract month, you can clearly see which month is being utilized the most. The December contract only has 6,086 contracts being traded with an open interest of only 11,271. It would be very difficult to move 50,000 - 150,000 contracts through that contract when you have all of this daily liquidity in the front month.

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  #13 (permalink)
Site Administrator
Manta, Ecuador
 
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Thanks Ben, makes sense. When I traded oil a few years ago, I did notice a much higher volume on the December contract. Maybe what I was mentioning is more prevalent in energy strategies than index strategies.

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
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  #14 (permalink)
Elite Member
La Jolla, CA
 
Futures Experience: Master
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Posts: 1,040 since Jul 2010
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Big Mike View Post
Thanks Ben, makes sense. When I traded oil a few years ago, I did notice a much higher volume on the December contract. Maybe what I was mentioning is more prevalent in energy strategies than index strategies.

Mike

Yes, CL is an entirely different animal and the further out contracts do have higher volume which is due to Calendar Spreads, etc. which constitute a majority of the energy markets' volume. So, that assumption is very valid in markets like Crude.

Cheers,
Ben

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The following 4 users say Thank You to Private Banker for this post:
 
  #15 (permalink)
Site Administrator
Manta, Ecuador
 
Futures Experience: Advanced
Platform: My own custom solution
Favorite Futures: E-mini ES S&P 500
 
Big Mike's Avatar
 
Posts: 46,240 since Jun 2009
Thanks: 29,352 given, 83,232 received


Private Banker View Post
Yes, CL is an entirely different animal and the further out contracts do have higher volume which is due to Calendar Spreads, etc. which constitute a majority of the energy markets' volume. So, that assumption is very valid in markets like Crude.

Cheers,
Ben

Good to know I haven't completely lost my mind, just yet.

Enjoy your weekend!

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make.
4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers.
6)
Help using the forum? Watch this video to learn general tips on using the site.

If you want
to support our community, become an Elite Member.

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