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NOTE: I sent this to the list yesterday and it still hasn't appeared.
My apologies if this post eventually shows up twice.
In response to recent posts on trading MidAm contracts, I dug out the
following table I posted to Rick Ratchford's now defunct TTC forum
last March. Rick had made a post to the forum recommending MidAm
contracts as a low-risk alternative to full-size contracts. Although
the information is dated, I'm sure recent volume and open interest
numbers at the MidAm are similar.
CONTRACT (SYMBOL) DATE VOL OI
=============================================
T-Bonds (XB98M) 980317 6913 12626
Soybeans (XS98K) 980317 2545 15826
Corn (XC98K) 980317 1530 9001
Live Cattle (XL98J) 980317 60 294
Live Hogs (XH98J) 980317 29 308
Japanese Yen (XJ98M) 980317 106 228
British Pound (XP98M) 980317 68 242
Deutsch Mark (XM98M) 980317 97 170
Wheat (XW98K) 980317 276 7651
Soymeal (XE98K) 980317 19 1477
Oats (XO98K) 980317 12 81
I believe the Volume and Open Interest numbers are totals for all
contracts - there was no explanation given for the numbers, but they
were the same for each contract. As you can see, MidAm T-Bonds are
the most heavily traded (I've heard of people daytrading T-Bonds on
the MidAm). At the other extreme is Oats, with Volume and Open
Interest numbers of 12 and 81, respectively. With the exception of
T-Bonds, Soybeans, and Corn, it looks like you'd have a hard time
finding someone to trade with in these markets.
I was surprised to see the low numbers for the currencies - you often
hear them recommended as an alternative to the full-size contracts,
and I personally have received good fills in MidAm currency contracts.
However, there doesn't seem to be much trading activity in these
markets. Also, MidAm currencies don't trade overnight, so you don't
have the opportunity to get out of a position during the night session
if the market makes a big move against you. I've found this out the
hard way.
The MidAm's "changer" system may provide more liquidity than would be
implied by the Volume and Open Interest numbers I've shown above.
Apparently, if an order can't be executed at the MidAm, the changer
system provides a mechanism for getting the order filled at the
corresponding "primary" market (i.e., with full-size contracts). The
MidAm explains this process at their web site
(http://www.midam.com/changer.htm); they use an example of a 100
MidAm T-Bond contract order actually being executed as 50 T-Bond
contracts at the CBOT. (This seems like an odd example -- I can't
imagine buying 100 mini T-Bond contracts at the MidAm instead of just
buying 50 at the CBOT, unless you're a MidAm floor trader.) This
process looks like it could slow down execution -- I'd be interested
in hearing from any RTs having experience with this.
Something to keep in mind trading MidAm contracts: they may allow you
to set your stops wider than in a full-size contract trade, but you
still have to consider your risk to reward ratio. For instance, you
can only risk $200 on a trade, so you turn to a MidAm contract because
it will give your trade more room. Using the oft-quoted reward/risk
ratio of 3:1, your profit target should still be the same as your
full-size contract profit target (i.e., $600). However, a $600 move
in a MidAm contract is two- or five-times as many points as the
equivalent move in a full-size contract, so what's perceived as a
low-risk trade really may not have reduced risk.
Brad Dingee
---JRizTRDR@xxxxxxx wrote:
>
> Does anyone have any comments on trading the Mid Am for smaller
acounts.. are
> the fills and liquidity as good as their bigger markets ?
>
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