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TRaffertu@xxxxxxx wrote:
>
> Hi RT's,
>
> I don't know if any of you are trading the Dow-Jones futures, but if
> you are a word of caution. As you know there is no overnight session in the
> DJ futures, and more importantly, there is no overnignt trading limits for
> the DJ. So while the the S&P 500 futures and the E-mini trade at night and
> have a 15 point overnight limit, the DJ has NONE and could move down 700
> points ($7,000/contract) the same as the dailey limit, on the open if it
> gapped limit down! While I'm not predicting this it still could happen. The
> same would apply to the options.
>
> Untill the CBOT rethinks this product I would be very reluctant to
> position trade it. With the S&P there seem to be buyers on limit down
> openings, on last Friday's limit down open the S&P futures were at about
> $3.00 down from the limit or minus $18 bid. Bad, but not tragic. The Dj
> seems to gap down more than the S&P or the E-mini and last Friday DJ position
> traders lost more than S&P/E-mini on both per contract and percentage basis.
>
> Good luck and good trading.
> Ray Raffurty
>
A warning about risk in these markets is always to be heeded, but a
couple of questions. If there is no overnight trading, how could you
expect overnight trading limits?
What good are trading limits anyway? So the SPoos can only go down 15
points , that doesn't mean your risk is any less. They can be locked
down and you can't sell, then when they reopen, they can lock down again
and you can't sell, and so on. If a gap down of 700 in the Dow happens,
you won't be able to get out of your SPoos or any other index either.
The point is trading limits don't limit your losses, any market can move
$7000 against you while not allowing you to exit. It may take a few
days of limits in some markets, but what is the difference. I personally
prefer a market that doesn't lock limit very easily. What is scarier
than not being able to get out at any price?
Remember, for every long position trader who lost more in the DOW than
the SPoos (as you note), there is a short position trader who made more.
I really doubt you will see the CBOT "rethink" this contract, they are
claiming success for it.
Eric
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