[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]

Re: AW: Re[2]: Globex2 in home



PureBytes Links

Trading Reference Links

> to obviate the risk of the market spikes you mention, have you
> considered trading options instead of the underlying? QQQ and OEX
> have sufficient liquidity, and, as you are no doubt aware, any long
> option comes with its own automatic stop built-in (the premium
> paid). 

I've definitely considered it.  I have very little experience in 
options and I haven't been able to understand things well enough to 
be comfortable with it.  I.e. it's difficult to get sufficient data 
on all the strikes to rigorously test how a system would have 
performed with puts/calls instead of futures, what would the 
entry/exit costs have been considering liquidity & slippage, things 
like that.

I question your liquidity comment.  When I've looked at it, QQQ and 
OEX had decent liquidity on a daily level, but not on a moment-to-
moment basis.  

I can't get Quote.com LiveCharts (my only source of live options 
charts) to behave at the moment, but when I've looked in the past, 
the MOST active options showed a volume of maybe 300-500 per hour on 
the CBOE website.  And when I checked them in a chart, I found there 
were typically only 2-3 *trades* per hour, each of which was a large 
block.  

And that was for the most active strikes.  What do you do if you 
enter a trade on an active strike, then the market moves in your 
direction for a few days?  Your put or call is now much less active.  
Seems to me the slippage would be horrific.

Also, the "money management stop" of the premium paid is not the only 
concern I have with the minis.  You also have to be careful about 
getting stopped INTO a position you didn't want, and at a horribly 
bad price.  E.g. on 6/22 the NQ spiked 75 pts in a minute due to 
rumors from the Mideast.  I happened to have an short signal at 1740. 
 If I'd had a resting stop in Globex, I probably would have gotten 
filled near the bottom of the spike at 1672.  Instead, I waited for a 
minute and got filled at 1740 like I wanted.  (The trade still went 
sour, but not as bad as it WOULD have if I'd been filled at 1672!! :-)

> BTW, I like your expression, "air pockets of liquidity"! Quite
> descriptive, and somewhat poetic, too. 

Can't take credit for that one.  I've heard others use it quite a few 
times.

Gary