|
PureBytes Links
Trading Reference Links
|
John makes several good points, but I would like to add one of my own.
When markets are trading smoothly, it is fine to evaluate liquidity by
the volume of contracts. Markets are not always smooth, however, and a
trader needs to consider how he expects a product to trade in rough
markets. Will market makers still make a reasonable market when the
bottom falls out? If not, will there be practical alternatives that
will allow the trader to eliminate or offset risk?
Frankly, the proof of the pudding is in the eating, and we haven't had
a good bite of bad-market pudding since the introduction of security
futures. Traders should give some thought to how to exit risk through
alternative markets (eg, buying puts or shorting stock to offset a long
position), and watch those markets the same way a driver watches the
traffic behind him in the rear-view mirror.
Regards
DanG
John J. Lothian wrote:
Earl:
Security futures challenge our understandings of what liquidity is.
Most contracts are judged by number of contracts traded. However,
with security futures products like the QQQ ETF, and others, the
contracts market makers are continually making 2 sided markets. I
regularly see bids and offers 100 up on security futures at both
excchanges.
Bill Rainer, former CFTC Chairman and CEO of OneChicago, recently
said that there has yet to be an order that is too large for
OneChicago market makers to handle. They have had 2000 and 3000 lot
orders all trade at the same price. I agree, and the same is true
for NQLX too.
Security futures markets have the most liquid cash markets available
of any futures markets. These cash markets are accessible to all,
but the market makers have multiple avenues to lay off their trades
in broad based indices, cash stocks, options or other security
futures products.
Thus, while we might brand low volume for a contract poor because of
low number of trades, that label does not really reflect the true
liquidity of those markets.
Regards,
John J. Lothian
Disclosure: Futures trading involves significant risk. Security
futures are not for everyone.
--- In realtraders@xxxxxxxxxxxxxxx, "EarlA" <earl.a@xxxx> wrote:
I see, Alex, thank you. I've not had much interest in the Single
Stock
futures and was unaware of the QQQ futures contract. I would think
that the
contract would have heavy headwinds going against the NQ, but at
1/8 the
size of the NQ, it might appeal to those seeking a very small
contract. I
would think however that, as you indicated, the liquidity would be
very
poor.
Earl
------------------------ Yahoo! Groups Sponsor ---------------------~-->
Get A Free Psychic Reading! Your Online Answer To Life's Important Questions.
http://us.click.yahoo.com/Lj3uPC/Me7FAA/ySSFAA/zMEolB/TM
---------------------------------------------------------------------~->
To unsubscribe from this group, send an email to:
realtraders-unsubscribe@xxxxxxxxxxxxxxx
Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
Yahoo! Groups Sponsor
To unsubscribe from this group, send an email to:
realtraders-unsubscribe@xxxxxxxxxxxxxxx
Your use of Yahoo! Groups is subject to the Yahoo! Terms of Service.
|