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Brad D. wrote:
>
> 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 trade a fair number of Midam contracts. I have probably done 100+
trades in the past 2.5 years using this exchg. I have done many of the
different contracts, even oats on a few occasions! I have done every
market listed above, plus beanoil, gold, CD. I have never used silver
(1000 oz CBOT has a slight vol/oI advantage there) or platinum (tho i've
considered it). There are a couple midam contracts that appear
virtually dead (i think theres a tnote +/or a tbill contract maybe, but
it trades v. little). Midam ED trades a few, but I've never used that.
I find the fills to be quite good. With the exception of a couple tic
variation at the hi/low I have never failed to receive a fill if the
"big" contract trades at a price where I would have been filled there.
It appears that the Midam basically functions by making a market
equivilent to the big contract +/- 1-3 tics. This means if you are
buying at 300.00 and the big contract goes to 299.90 you might not get a
fill on a limit order. But sometimes you will.
I usually enter on limit orders and exit on stops. The stops are
triggered as expected, and usually with approx 2 tics slippage. When
the stop is right on the high or the big contract on occassion the Midam
will trade outside of that range and stop you out; on other occassions
its hi won't stop you out when you would have been stopped in the big
contract.
In the height of the crazy grain markets of 96, I put in a market order
for Midam wheat when the big contract was 2c below limit and was filled
at the limit on the Midam. The big contract soon hit limit so I really
don't know if that was slippage or just the time it took to get the
order in. There may have been one incident about the same time of major
slippage (0.30) in beanoil when the grains came crashing down a couple
days later but i was in newbie daze mode and never did follow up on it
(I was liquidating everything in preparation for taking a break from
trading) - it could actually have been a gap opening (in the big
contract too). There was one case where both the Midam and CME hog
market hit the limit and i was able to get out, even tho the CME market
had an unfilled pool of orders at the end of the day.
To reiterate, in all of the rest of the trades the slippage on stops
has been almost always $5 - $10. I remember grumbling to myself
recently how unusual a slip of about $25 (0.80) was in gold.
> 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.
> 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. <snip>
I agree you have to watch your strategy. A big problem is commission
costs relative to the potential reward, particularly on the 1/5 size oat
and corn contracts. (I decided to skip oats for this reason; i prefer
cbot corn but have done 2 Midams instead if the situation is volatile.
) As a study i took a one year track record of a fax service (a fairly
active technical system) and applied it to Midam contracts. The
service was quite profitable, but was more or less breakeven on Midam
primarilly because of commission costs relative to the smaller profits
(I used $30 comm.). I still feel some of the Midams have enough
potential to trade. It's pretty easy to get a few $100 profit or loss
going in most of the contracts, and i've had an occassional $800
profit. (Currently short 1 midam Dec Hog from 50.50 :). )
A branch thread to this one would be: what is the best way for a small
account (mine is $4K approx.) to trade if at all? Midam, options, or
attempt the big ones?
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