How to invest a billion in futures?

Discussion in 'Trading' started by bontrjd, Oct 15, 2007.

  1. bontrjd


    While getting a hearty chukcle reading how averging down is the holy grail, someone posted a Niederhoffer article that said he invested a billion in futures on a hunch. Can someone easily invest a billio dollars in futres in one day without moving the markets far against them? If not, what would he buy to invest a billion that fast? It obviosuly bit him.
  2. presumably they are talking about a billion in face-value futures.

    so a billion would be, for example, in the S&P emini futures, 12,800 contracts, or 10,000 contracts in the 30yr Bonds.

    whilst this is pretty hefty size, its not unworkably large - on the 30yr bonds I'm seeing 18,000 contracts offered on the 15 inside prices, so if you wanted an instant fill, you could fill 10,000 contracts with about 8 ticks slippage.

    If you wanted to work a price, you could probably sweep three or four prices and work the rest which would likely be eaten by arbitrageurs on the calendar spreads in a matter of seconds.

    so not difficult to bet a billion if you really wanted to.
  3. Likely any stockbroker would ask you for collateral when trading futures, even if you show up with one billion. LTCM provided a good lesson about collateral margin.

    So you would buy, at most, 500 or 300 million in futures, the rest in treasury bonds or stocks.
  4. About 13,000 ES contracts have a notional value of $1,000,000,000. The ave daily volume in ES is about 1 million contracts, so your order size is a little over 1% of the daily volume. While significant, it's not that large. Take a look at ES bid/ask size during heavy trading. It's often 2000 contracts bid, 2000 contracts ask. So it would not be that difficult to buy/sell 13,000 contracts in a single day.