E-Mini Long & Short, Same time Same account?

Discussion in 'Risk Management' started by Futuresnut, Nov 20, 2010.

  1. Tried to decide where to put this question; in broker? trading? Just decided to try here.

    I have an IB account (used to have two open) and want to trade a system that uses intermediate and short term emini (ES) trades at the same time. So I could be long ES for the intermediate yet hedge in the short term with a short ES but don't want the short to cancel out the long. My plan was to use one account for the intermediate trades and the 2nd for the short term but with the fee structures now I would like to somehow do this in just the one account.

    I guess I could do some sort of math to decide how to use SPY as an intermediate equivalent but I'm sure it won't be as precise as using the same instrument (ES) for both time frames.

    Any ideas from anyone doing similar trading?
    Thanks. :confused:
  2. 500 SPY is 1 ES. Or, put your long in the frontmonth and short in the backmonth contract. i.e., long ESZ0, short ESH1. SPY can work but ofc different margins/hours/tax/overnight issues, etc.
  3. Wow! That was quick. Thanks!

    Dang! Why didn't I think about that? Hmmm. I'll have to look into what variances come into play with using different contracts but seems liquidity would be better for front month (hence use it for the short term hedge trades) and the further out contracts for the intermediate, lesser traded primary positions. I had thought about using in the money options but didn't want to deal with the greeks and additional variances those instruments introduce; just trying to keep it simple.

    Thanks again! That might work pretty well. :D
  4. If you trade two or more strategies on one instrument, just trade the net position of the strategies.

    Yes, it's that simple.
  5. Technically speaking yes but for me I prefer tracking one intermediate trade mechanically and placing hedges on pull backs.

    Also, over the course of a good intermediate market run it can (but not always) translate into less commissions.

    Example (assumes 3 in & out hedges over an intermediate term trade):

    Hedge approach
    - Long 1 unit (intermediate)
    - Short in & out 1 unit (hedge) *note: separate intermediate still long
    - Short in & out 1 unit (hedge) *note: separate intermediate still long
    - Short in & out 1 unit (hedge) *note: separate intermediate still long
    - Close 1 unit (intermediate)
    total 4 units round trip trades

    Net position approach
    - Long 1 unit (intermediate)
    - Short 2 units (one cancels Long intermediate; 2nd is now short hedge)
    - Long 2 units (one cancels short hedge; 2nd is now long intermediate)
    - Short 2 units (one cancels Long intermediate; 2nd is now short hedge)
    - Long 2 units (one cancels short hedge; 2nd is now long intermediate)
    - Short 2 units (one cancels Long intermediate; 2nd is now short hedge)
    - Close 1 unit (cancels short hedge)
    Total 6 units round trip trades

    The more hedges there are during an intermediate trade the lower the cost since you aren't reversing the intermediate trade so many times.

    corrected: had included one too many Long reversals in first post
  6. Hi iam pretty new to this is it possible for you to explain to me how i can trade long and short on the future market is that possible to do

    i want to open 2 trades (1 Long) and 1 (short) at the same time to offset risk, is that possible to do and how can it be achieved.

    Thanks :confused:

  7. That's basically the same question I was asking to open this thread so I'm going to ask what specific question about the responses do you have? I see you say you're new so maybe you don't understand what's already been posted.

    The short answer is yes but not exactly - at least not within the same account.

    Within one account you have to trade different months of the same instrument; in my case the S&P 500 e-mini. For instance I would be long the ESM1 (Jun'11) contract and then hedge with a short trade of the ESH1 (Mar'11) contract. Both would be active trades at the same time and basically net out when both are in play but not precisely since their pricing movement may be slightly different due to the time difference and trading volulme of the contracts. If you traded the ESH1 long then entered an ESH1 short it WOULD offset and close the long trade so that's why you have to use different month contracts in order to have both trades active at the same time (at the expense of some liquidity on the further out contract and looking at different pricing levels between the contracts.)

    The other option is to have two accounts open and trade long the ESH1 in one account then hedge that position with a short ESH1 in the second account. For instance catch the down moves when the market drops but then rebounds without having to exit then re-enter the long. Ever so often you could transfer funds between accounts to maintain proper balances between them. I prefer this approach but with IB's accounts you'll really take a hit on their monthly fee structure if you don't actively trade. Hope that helps.
  8. So you can't trade a long and short position within the same futures account at the same time? I can see how the positions would cancel each other out on one level, but what if you are managing the trades to different targets or stops? Say I'm long the ES and I'm still above my stop and then I get a short trade trigger as well, but the parameters of my initial long trade are still in effect, so I continue to hold. Let's say then that the market goes down, but doesn't hit my long trade stop, then reverses and I cover my short trade for a profit and then the ES continues to rally and now I'm back to only having one position, i.e. long.

    Is there some kind of rule that says you can't do that?
  9. joe4422


    Real simple answer: you cannot go long and short the same ES contract in one account.

    You just need to simply open two accounts, or even better, open another account with a different broker. Every one should do this, just in case something goes wrong at their brokerage and they can't get out of a trade their in. This way you can hedge yourself with the other brokerage.

    Another way would be to take the other trade with the YM instead of the ES.

  10. Hi Guys , what does this mean, ie trade the net position. can you provide me with an example. thanks in advance.
    #10     Jan 9, 2011