As I am sure you know .. trading is about probabilities. I am postulating a strategy, which is preconditioned of the situation described by the original poster not being resolved in a reasonable manner by the exchange. i) based on the number of contracts in the bid stack I can calculate how many contracts do I need to take the market down x points. ii) surely I am not expecting to win every time .. and some instances a loss is to be taken. For the success of the strategy I need to win about 50% of the time. Naturally, if exchange later on bustes the trades then this strategy can't be successful. However, as of now the exchange hasn't done anything to rectify the situation described by the original post - which means that there is evidence to the contrary - exchange will not bust the trades.
On the plus side, this sort of one-market move is likely an arbitrage opportunity. If you can suck up mini contracts below market, and sell full size at the market, you've got a mostly risk free arbitrage. CME has an electronic mini-corn contract which I believe has an average daily volume of .8 contracts. If you spread mini corn versus full size corn in the right ratio, you get a 100% rebate on your margin. You got screwed because no one was willing (or interested) in taking the arbitrage.
my last encounter with the COMEX was a trade busted a day and a half later...of course, it was temporarily in my favor and a decent winner...since then..I have returned to "tire kicker" status...finding opportunity in using futures action to trade silver equities...crumbs maybe ....but enough crumbs will make a cake
Any book on arbitrage would be completely useless. Big hedge funds love arbitrage since it is free money, or the closest thing to it. The problems with arbitrage are that it often requires large computing horsepower to identify opportunities and to execute quickly enough; and that it tends to wear itself out to the point where having costs down super low makes a difference. If five people are doing the same arbitrage, there will be less for each one. If fifty are doing it, it might barely cover execution costs. By the time you read a book on a particular arbitrage it would be game over. So if you want to trade arbitrage you really need to be on the hunt for new opportunities or ones that are slightly more risky hybrid plays that are part position trades. - Curtis
hey all i got a kind of unrelated gold futures option question on ECBOT lets say i SOLD some gold future option PUTS for 570 and they expire on sept 26th lets say its now sept 26th and gold is at 590 can i let my SOLD puts expire and collect all the money and NOT be rolled into some other position? or do i have to cover my puts for 10 cents a piece to close out those positions before expiry? thanks!!