I don't understand what you are talking about? Are we talking EASE of scaling in and out or if you feel it's too risky vrs SPY? As a newb, trading SPY vrs trading ES might be the way to go only because you can trade smaller as you gain experience. But all the fees of trading SPY can add up. Plus you have to be more precise in ES trading because of tick increment.
I am talking about both: how can one easily go from $40,000 position down to $30,000 position so that his risk does not increase?
ES trading is inherently more risky (as compared to SPY). But, if one is a good SPY daytrader, then one should work on transitioning to ES. Tax treatment is much more favorable and so are the fees. Especially now with SEC fee increasing 4 fold or whatever it is. Also, it depends on how you trade too. Daytrading vrs swing trading vrs long term position trading. I'm speaking from a daytrading perspective, flat at the end of everyday.
Memberships are expensive costing about 750k. Leasing a seat would be about 1k/month. http://www.cmegroup.com/company/membership/ Not sure if you hold overnight or just intraday, but you can find a broker that offers $500 margin. If you are looking to trade 10-20k SPY' worth of ES you'll be safe with 100k in the account or less. Futures FCM's are require to keep customer funds segregated. To my knowlegde no traders has ever lost their deposits. let's quickly look at a few benifits: 1. lower transactions costs 2. save about 100k yr in SEC fees 3. futures are taxed at a lower rate. 60% long-term and 40% short term. So if you make 100k/yr trading SPY's, you would save about $12,500/yr in taxes. Just open a small account with 5k and see if you like it.
ES trading does not have to be inherently more risky. The risk only derives from leverage. But that's the trader himself who sets the leverage relative to his trading capital so he is in full charge of the risk. Nobody forces his hand to use the leverage in case of ES contracts. That's why in case of a loss the trader might want to scale back his position to decrease the leverage and consequently the risk.
It IS inherently more risky because the minimum trade size is 1 lot of ES and that equals 500 shares of the SPY. So you HAVE to assume more risk because of the conversion. You can't trade 1/5 one lot but you can trade 100 shares of SPY. Yes, leverage is great in the ES but like I said a good trader knows this and trades appropriately. You cannot say that cost structure is more advantageous in the SPY vrs the ES because it is not.
Unsure from the thread if you are talking about HR1068, which will effect all of us. The 1/4% tax on all $$$ transactions will limit trading, lower the thin margins we presently have. I trade easily $100K per day, expecting 2-6% based on 3x ETF's, $100K trading which is fairly easy , especially without T+3, means $250 tax from my trading for win or loss.
Yes, leverage is great in the ES but like I said a good trader knows this and trades appropriately. Can you give some example so I would understand better what the appropriate trading means. You cannot say that cost structure is more advantageous in the SPY vrs the ES because it is not. Yes, it is because one can't fix the risk ( leverage) with futures according to his losses. Because of the futures contractual structure.