expensive bid/ask spreads?

Discussion in 'Financial Futures' started by Gregk, Jun 30, 2010.

  1. Gregk



    I am working on a trading system that trades a basket of uncorrelated futures. The time-frame is day, from open to close.

    I use the average daily range for each of the futures contracts so I can trade the number of contracts to make risk and profit potential equal between all of them.

    I am having an issue with costs in some cases though, and perhaps someone can help me to understand what is happening.

    Using 2 full S&P contracts as a base, I need to trade 25, 10 year T note contracts. My total average slippage (difference between bid and ask price) for 2 SP contracts is about $250. It's $800 for T bills and a whopping $940 for US bonds!!

    If I add my $5 round turn commissions, it's $10 for the S&P, and $125 for T bills. Yikes!

    If I am reading the bid / ask correctly, why is trading T bills US bonds, and ED so expensive compared to SP, Oil, and Gold?

    And one more question related to the bid-ask issue. If I enter at the open, and exit at the close, am I effected at all by the bid-ask spread?

    Greg K
  2. 1) Instead of a 2-lot of the "big" S&P contract, you may be better off with a 10-lot of eMinis.
    2) Your slippage on a 25-lot of 10-year note futuures ought to be $390.63 (25 times $15.625). Slippage on the 30-year bond can be $781.25 (25 times $31.25).
    3) To trade interest rate futures can be more "expensive" because the contract is smaller with respect to the S&P-500 and because the bid-ask spread is a much larger percentage of the average daily range than it is with the SP, gold or crude oil.
    4) Are you affected.......greatly! :cool: