Advantages of the ES over SPY ?

I trade options but am researching futures trading, specifically the ES. The ES seems to have a large number of traders making their living from day trading. Obviously the taxation is better on futures vs options, but liquidity and volume are excellent on both and price moves are largely in tandem. Commissions are higher for options when trading only a few contracts.

 

60/40 taxation for Section 1256 contracts.

 

ES is a much less expensive way to trade S&P500 price action than SPY. You have to trade 10X the number shares in SPY to equal 1 contract of ES.

ES trades overnight.

More flexible leverage.

In favor of SPY...

The only reasons anyone trades SPY are;

1) 0.01 spreads
2) not enough money to trade the big contracts
3) account restricted from trading futures

So if slippage is very detrimental to your trading, then you'll want to trade SPY.

 

Just for clarification: it's 500 SPY = 1 ES

Pro for ES: lower margin, excellent liquidity without being front-run by 0.0001c

Pro for SPY: Lower commission (for retail), tighter spread.

 

ES and SPY back test differently for the same strat. The result$ are quite different.

:eek:

 

You're right. Sometimes I go brain dead for a minute.

 

I am curious to what you have found as they seem a parallel instrument..

 

Spy had overnight gaps and was more volatile in general.

 

True or not? Limited number of Stocks (SPY?), while the maximum number of futures contracts (ES) can be Unlimted?

http://www.elitetrader.com/vb/showthread.php?s=&threadid=255549

 

You get charged implicit fees on SPY by State St.