NexusFi: Find Your Edge


Home Menu

 





Achieve market neutrality for NQ and ES


Discussion in Traders Hideout

Updated
      Top Posters
    1. looks_one liquidcci with 2 posts (0 thanks)
    2. looks_two calhawk01 with 2 posts (1 thanks)
    3. looks_3 Quick Summary with 1 posts (0 thanks)
    4. looks_4 rmejia with 1 posts (4 thanks)
    1. trending_up 6,497 views
    2. thumb_up 5 thanks given
    3. group 5 followers
    1. forum 6 posts
    2. attach_file 3 attachments




 
Search this Thread

Achieve market neutrality for NQ and ES

  #1 (permalink)
 calhawk01 
baltimore marylnd
 
Experience: Beginner
Platform: ninja
Trading: es
Posts: 91 since May 2013
Thanks Given: 5
Thanks Received: 11

Hi,

What is the correct # of contracts I need to buy/sell NQ if I am long/short ES, so that my gains/losses in ES/NQ are offset by gains/losses of the other instrument.

For example; if i am long ES. How many contracts do I have to be short NQ. So that my losses in ES/NQ are offset by gains in ES/NQ?

I was currently using 2 contracts of NQ to offset the movement of 1 contract of ES. Since 1 tick of NQ = 5 and 1 tick of ES = 12.5.

So two contracts of NQ = 10$ movement
VS
1 contract of ES = 12.5$

The difference is only 2.5$. Which I can deal with. But the issue with this method is that NQ tends to move a lot more on average than ES. And my gains/losses in ES are not offsetting my gains/losses in NQ.

Thanks

Started this thread Reply With Quote

Can you help answer these questions
from other members on NexusFi?
Deepmoney LLM
Elite Quantitative GenAI/LLM
Are there any eval firms that allow you to sink to your …
Traders Hideout
Ninja Mobile Trader VPS (ninjamobiletrader.com)
Trading Reviews and Vendors
Build trailing stop for micro index(s)
Psychology and Money Management
NexusFi Journal Challenge - April 2024
Feedback and Announcements
 
Best Threads (Most Thanked)
in the last 7 days on NexusFi
Get funded firms 2023/2024 - Any recommendations or word …
59 thanks
Funded Trader platforms
37 thanks
NexusFi site changelog and issues/problem reporting
22 thanks
GFIs1 1 DAX trade per day journal
22 thanks
The Program
20 thanks
  #3 (permalink)
 
liquidcci's Avatar
 liquidcci 
Austin, TX
 
Experience: Master
Platform: ninjatrader, r-trader
Trading: NQ, CL
Posts: 866 since Jun 2011
Thanks Given: 610
Thanks Received: 1,091


To perfectly offset they would have to essentially move in exact parity which they do not. Even then as you mentioned there is a $2.5 dollar gap. Might be better if you lay out what you are trying to accomplish or detail out your strategy and thinking process. I bet someone here can give you some ideas that might be helpful.


calhawk01 View Post
Hi,

What is the correct # of contracts I need to buy/sell NQ if I am long/short ES, so that my gains/losses in ES/NQ are offset by gains/losses of the other instrument.

For example; if i am long ES. How many contracts do I have to be short NQ. So that my losses in ES/NQ are offset by gains in ES/NQ?

I was currently using 2 contracts of NQ to offset the movement of 1 contract of ES. Since 1 tick of NQ = 5 and 1 tick of ES = 12.5.

So two contracts of NQ = 10$ movement
VS
1 contract of ES = 12.5$

The difference is only 2.5$. Which I can deal with. But the issue with this method is that NQ tends to move a lot more on average than ES. And my gains/losses in ES are not offsetting my gains/losses in NQ.

Thanks


"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
Reply With Quote
  #4 (permalink)
 
rmejia's Avatar
 rmejia 
Puerto Rico
 
Experience: Intermediate
Platform: thinkorswim
Broker: TD Ameritrade
Trading: Options
Posts: 379 since Oct 2010
Thanks Given: 3,614
Thanks Received: 441

Here's a link that talks about this:

https://tastytrade.com/tt/shows/market-measures/episodes/sizing-futures-pairs-01-12-2015

Below the video to the right where it says RESOURCES, click on that to see the slides. Here are slides 8, 9 & 10:




Reply With Quote
Thanked by:
  #5 (permalink)
 
liquidcci's Avatar
 liquidcci 
Austin, TX
 
Experience: Master
Platform: ninjatrader, r-trader
Trading: NQ, CL
Posts: 866 since Jun 2011
Thanks Given: 610
Thanks Received: 1,091

If you are looking for delta neutral type strategies I would look into options. I have done it with options but never with futures so I am not really qualified to comment on trying to do it on futures. Although I will say trying to be market neutral can get very complicated and takes a great deal of experience to make money. It is more like a chess game. Like any other trading you can also lose money at it. I have found trading directional is better especially in the futures market.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
Reply With Quote
  #6 (permalink)
 calhawk01 
baltimore marylnd
 
Experience: Beginner
Platform: ninja
Trading: es
Posts: 91 since May 2013
Thanks Given: 5
Thanks Received: 11


rmejia View Post
Here's a link that talks about this:

https://tastytrade.com/tt/shows/market-measures/episodes/sizing-futures-pairs-01-12-2015

Below the video to the right where it says RESOURCES, click on that to see the slides. Here are slides 8, 9 & 10:




THANK YOU! that is exactly what I was looking for.

IV ratio of 1 to 1 on ES and NQ makes sense.

Here is what I came up with earlier;

ATR(14) of ES = 27.61; # of ticks in this range = 110.44
ATR(14) of NQ = 66.59; # of ticks in this range = 266.36

ES = Value per contract of this range in ticks = $1380.5
NQ= Value per contract of this range in ticks = $1331.8

What i'm working on is a spread strategy. Previously I had been using 2 contracts of NQ and 1 contract of ES. The thought behind that was that if 1 tick of NQ = 5$; then to make that equal.. tick by tick.. i'd have to buy two contracts. Since ES 1 tick is $12.5. But the issue I was seeing is that NQ tends to move a lot more than ES.

Thanks guys!

Started this thread Reply With Quote
Thanked by:
  #7 (permalink)
 
treydog999's Avatar
 treydog999 
seoul, Korea
 
Experience: Intermediate
Platform: Multicharts
Broker: CQG, DTN IQfeed
Trading: YM 6E
Posts: 897 since Jul 2012
Thanks Given: 291
Thanks Received: 1,039

If I were doing this I would look at trying to do some kind of regression over historical data to find the optimal hedge ratio. You can obviously do any type of regression you want, but it would be future to future. Using IV is probably not the best here for two reasons. First if you are looking at options that expire on different months than your future, you are going to have distortions due to the different time horizons. Next is that IV is directionless and not directly measurable. So even if there is any additional perceived volatility in the market it will affect the IV, no matter up or down. However your notional value will either grow or shrink depending on if the move was up or down. This adds some additional complexity if you want to be able to have balanced results for both upwards volatility growth or downwards in regards to price shifts.

Reply With Quote




Last Updated on February 7, 2015


© 2024 NexusFi™, s.a., All Rights Reserved.
Av Ricardo J. Alfaro, Century Tower, Panama City, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada)
All information is for educational use only and is not investment advice. There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
About Us - Contact Us - Site Rules, Acceptable Use, and Terms and Conditions - Privacy Policy - Downloads - Top
no new posts