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Futures vs. Stocks

  1. What are some of the benefits/drawbacks of trading one vs. the other? I understand that futures are easier (because you only have to learn how a couple of things move, but every stock is different), but that stocks can make bigger moves (both up and down, of course). What other differences are there?

    Also, what are the tax consequences of futures vs. stocks, and is there any way to be taxed less on stocks? (I know that you can deduct 'business expenses' if you are a full-time trader. How do you show this to the IRS? Are there other ways to reduce the 30% cap gains tax? What's the tax rate on futures?)

    Sorry to be lumping the tax questions in the trading section, but this all part of one question...

    Thanks for your help, all!
  2. Futures have some tax advantages, 60/40 rule.

    Very different trading.
  3. Yes the taxbreak, leverage is rediculous, liquidty, etc, etc... BUT metoox is right they are a different vehicle to say the least...

    PEACE and good trading,
  4. Loki,

    Recommend you do a search here at Elite (upper right-hand corner), or scroll back thru pages in the Trading forum. This topic has been discussed many, many times.
  5. Aside from the tax advantages, how different is trading e-mini futures to QQQ, SPY?
  6. What exactly is the 60/40 tax rule?
  7. Hi...trading commodities instead of stocks can save you up to 50 percent tax on most of the gain...Ted Tesser, CPA

    Ted explains this alot better than I do,so I'll just quote from his book" The Traders Tax Solution". "The short-term rate, which generally applies to positions held less than a year, can be taxed up to a maximum rate of 39.6% at the highest tax bracket. Long-term capital gains, which apply to positions held for a year or longer, max out at 20 % at the highest tax rates. Commodity positions, however, are split between long-term and short-term considerations, with 60% of the position being considered short-term and 40% being considered long term".

    Here's a quick example for you. Say you do a trade and make $1,000. If that was a stock trade and your in the maximum bracket(39.6%) you fork over $396 to uncle sam. If you did say an emini S&P instead,and made a $1000 you fork over $318, saving you 78 bucks. Hope this helps

  8. I certainly wouldnt say that futures were easier. You have to watch the whole market just as you do for any vehicle so the learning curve is not any shorter.
  9. you don't make any money. Although many on the board may do well trading futures, we have found over the years that trading futures off of the trading floor is much more difficult. Since the futures are the leading indicator (showing market direction for stocks), it is easier to follow them than to anticipate them.

    We have many who trade emini's, but very (very) few do well.

    Stocks allow you to use opening strategies, pairs trades, MOC strategies, etc.

    We have debated this topic on the board before, and I don't want to seem too biased, I am just pointing out that our traders seem to be doing much better with stocks than futures.
  10. easyrider,

    what are the best futures brokers around? who would you recommend?

    My trading is focused on QQQ and OEX options, as such, I concentrate on the movements in the NDX and OEX/SPX, and have had good success with direction and short-term movement using TA. Would it still be difficult for me to trade the e-mini futures? If so, where would the difficulty lie? Would the brokers make a difference?

    Thanks. :)
  11. the actual broker does not make a difference - but the rates you pay could certainly affect your future bank accounts health!
  12. I find it laughable that the only methods your seem to advocate are Brights methods. Personally when I see people put down other methods of trading(level 2, futures, directional, system, etc etc) it lowers my opinion of them or at least makes me wonder what their motives are.

    Are there ANY methods of trading you advocate beyond Brights methods??
  13. Hi...stevet makes a very good point. Try to find the lowest commissions possible. They affect your bottom-line" considerably"

    I understand that IB (Interactive Brokers) offers an excellent
    $4.80 rt,and DTFutures has $7.00 rt. Hope this helps
  14. Wavetrader

    Ive only used IB for futures so cant make a comparison. They are ok so far. Had a couple of small glitches a few days ago but lately its been allright. I dont see much of a difference trading the eminis vs trading the QQQ. To me, theyre all pretty much the same. I dont know if Dons right or not about the futures leading the way. I think that is probably an oversimplification. I have always relied on what I call the "pace" of the market. If it starts slowing down or speeding up, etc.

    ps: If your doing well with what your doing why change?
  15. 4.80 means the cards are stacked against you, $7 means you might as well throw in the towel, before it strangles you
  16. 4.80 means the cards are stacked against you, $7 means you might as well throw in the towel, before it strangles you


    Very true...but, unless you're trading 100 contracts a day I don't know where you can get round turns cheaper?

  17. Breakout

    well, yep, but maybe in your point is an important point for everyone!

  18. Yes...the point being, we are getting screwed in commissions.

    Your okay stevet, give me an email sometime.

  19. Breakout

    well, not just that, but also that maybe if 100's is how to get the right commision - maybe hundreds is what everyone should be doing - just a wine induced thought!

    p.s my broker is my friend - yeh - right!