DAX Help Questions

I have asked above questions over a week ago, and found the answers by speaking to Eurex US (nice pips there, spent quite some time talking to me). I’ll post the answers here in case someone needs them too.

1) There are no limits, but there is something called Volatility Interrupt. The exact formula is not available to general public, but the idea is to halt the trading after adverse price movement over a short period of time. After trading is resumed, it is treated as new open (can be up/down from halted price). It happens on average once a year per instrument.
2) There is a volume to trade contracts right up to expiration. Obviously no need to worry about delivery since it is cash settled and the account will either be credited and debited if contract is not closed or rolled over.
3) The rules are pretty much the same as if trading S&P or Russell. Some minimal difference in exchange fees.

I just finished reading “Exchange Traded Funds and E-mini Stock Index Futures” by David Lerman. I found it to be very informative, it answered many questions that I had and explained mechanics of Stock Index Futures.

Regards,
redduke

 

HEy Red duke
Was just checking up to see how is your trading going on in The DAX
I am thinking of trading it preety soon

 

Hi Ksonsinc,

It actually going very well. I am all set up for live trading and will do at least one day next week to test platform execution. If real execution will be as good as sim (I am realistic now what size can be used on dax), I would be very impressed. I currently trade forex with real account, so very familiar with psychological affect of money on the line. So my main concern is platform execution, but will find out this in near future.

Regards,
redduke

 

Redduke,

Any update on how things have worked out for on DAX since your last post in this thread?

 

Hi MindSabre,

Things are going great. Wish I realized benefits of futures over forex earlier, but not a biggie. I mostly trade DJ Euro Stoxx. They are less volatile than DAX and way more liquid (about 1 mil contracts a day).

Regards,
redduke

 

Nice 3K stop/agressive sell @40/00 in the Dax today. Got all the markets moving.

Wonder who pressed the button....

 

I think the level that set us off today was that 5536.00 low that has held us for the last 3 days. My T&S shows precipitating stops from 5538 down with that bid size of around 238 contracts first being taken out and then triggering resting stops. I love those kinds of moves. We used to have that kind of a sweep on highs/lows all the time. Makes for good scalping.

 

Yes it was much appreciated but savage for anyone caught the wrong way.

 

i used to think so too, however, recently i had to compare volatilities, and it turns out that dax and estoxx volatilities track each other very tightly, the difference between them is negligible, much less than S&P vs Dow, it's more like S&P500 vs OEX/S&P100 - it was surprising to learn this, since logically i'd think estoxx is more diversified, hence it should be relatively less volatile.

you can go to Deutsche Boerse's website and pull up charts on VSTOXX and VDAX-NEW (respective implied volatility indices), there is a 5-year history for both of them - DAX was slightly more volatile on the big move down in 2001-2002, but not these days.

as for overall liquidity, while the eurostoxx has more volume, DAX is a much bigger contract, so if you look at euro-value weighted volume, i think that DAX is not that much behind, especially with the huge volumes we have had lately on this last down move.

the negative thing about DAX may be slippage, but you have to keep in mind that in volatility adjusted terms, 1 tick on estoxx is roughly 3 ticks on DAX (i.e. 1 pt estoxx ~ 1.5 dax) - so you can get slipped by a few ticks on DAX but with roughly the same frequency as by 1 tick on estoxx, on average.

p.s. i guess dax has the combindation of
-higher index value level
-smaller tick size
-higher point value
-less market depth

which creates an "impression" of it being more jittery at the micro level, but it's not materially different from estox in strict volatility terms.

 

DAX 1 tick is 12.5 EUR, EURO STOXX 1 tick is 10 eur, so tick value difference is not that much bigger. Someone on this board called DAX - dancing DAX, and I think it is true. If you look how quickly prices change on DAX and then compare it to SOTXX, STOXX has a much slower price jumping.