Hedging YM with INDU

Discussion in 'Index Futures' started by ranger64, Mar 2, 2008.

  1. ranger64


    trading with Interactive Brokers: suppose I have a position in ym and globex goes down. If I want to hedge my ym contracts with the pit-traded dow contracts (indu), do i need additional funds in my account to pay margin for these pit-contracts? what i´m doing is neutralizing my risk, so it wouldn´t seem logical.
    For example if I am long 2 ym-contracts, globex goes down and I hedge my position going short one indu-contract (one indu equals two ym), margin requirement should actually go back down to zero. is this the case?
  2. No, you have to factor in the leverage which is built-into the YM contract vs the indu.

    Offhand, I don't know whehter it is 10 to 1 or 100 to 1, but that is the amount of have to hedge by (I've read the information, but I wouldn't do this, so it's archived somewhere on another computer's hard drive).

    Basically, I don't think it's worth it, or something you should not be worried about so long as you do not over-leverage.
  3. I don't know what INDU is, but
    YM(electronic only), DJ(pit-traded), and DD(electronic only) are all fungible...

    2 YM = 1 DJ
    2 DD = 5 DJ

    Only DJ, because it is pit traded, can be utilized in the event of electonic failure.
    And only YM and DD positions in multiples of 2 can be offset with DJ. Remainders are at the mercy of the market.

    Current exchange margin for DJ ($7,005 per, as of 2/29/08) is needed to place the offset. Depending on your broker, assuming you communicated clearly at the time of the offset trade, will account for the offset at the end of the current trading day, or the next trading day.

  4. ranger64


    INDU is the IB symbol for DJ (10 dollar cbot floor contract).
    2 YM equal 1 INDU
  5. OK, that clears it up (I was thinking the ETFs).

    Once again, it's not something i would be concerned with though.

  6. ranger64


    MBS, I´m curious, why wouldn´t you be concerned? Suppose you are long several contracts YM, globex goes down, and the market crashes several hundred points before globex is available again. You wouldn´t consider hedging your position?