I could see the micros being useful if using a longer term system which needs a large stop distance. Then the micro's have better granularity, eg for a 1000 tick stop: Each full size contract might be $10000 of risk to your stop. The mini contract might be $5000. And each micro $1000 dollars. I don't think there are currently any micro ES or NQ or YM futures on the CME. There is no good reason for CME not providing them. Most probably CME doesn't want to lose the larger commissions they get from the 1 lot retail crowd who might switch to the smaller and cheaper micro. To protect revenues CME could set fees on the micro SIFs to around half the fees of the e-mini SIFs. This is what Eurex did when they introduced the smaller 1/5 sized mini DAX contract and it has worked out quite well for Eurex.
The other problem is not having spreads to roll these futures so you have to pay transaction costs twice.
Which micro's are you looking at? I often use EUR/USD micro future https://www.cmegroup.com/trading/fx/e-micros/e-micro-euro.html It has enough volume for me.
Hey Hobby, how do you roll the micros? Do you have an issue with the spread of the micros which are usually 2x to 3x that of the normal contract?
I can't speak about all micro's: I only use the EUR/USD micro (symbol name M6E at Interactive Brokers). It only has a one tick bid/ask spread in many cases. Otherwise it has a two tick bid/ask spread. However, if I then send a limit order at the mid between bid and ask is it often filled within a couple of seconds. The trade commission for one contract is only 0.33 USD, so that isn't too bad either. I am using a lazy approach related to rolling: instead of using a spread I place two separate trades: one to close the position on the expiring contract and a second trade to open the next contract. However, in my automated trading system is that often not required as I allow my system to gradually roll over during a two week period. When the position size has to be reduced will an expiring contract be disposed of and if the position size has to be increased will the next contract be acquired. So, during this period, do I have a combination of both contracts. Only near the end, usually two days before expiry, do I forcibly roll over the remaining contracts in the expiring contract. I prefer this micro contract over the regular one as the contract size is smaller and thus fits better with my account size. It is part of the risk management in my system.
Thanks a lot for explanation and write up. I'm wondering if you are running your strategy on other stuff like micro oil and micro JPY. Is your strat only for EUR? I'm also considering the micros for running GAT strategies, they are easier to scale in and out if not trading a huge account.
My futures program is based on the first book @globalarbtrader wrote. I started of with a few small-sized contracts and gradually expanded as I made more money available for it (plus positive trading results). I did use micro JPY in the past but stopped using it. It had a much wider bid/ask spread than the micro EUR. And rolling over was more difficult: not enough trading of the new contract in the days preceding the expiry of the old contract. I would have to close the existing position, wait a couple of days and then re-open the position, using the new contract. At that time was I too lazy to do this, plus that my software was not properly able to do this. Meanwhile has my software changed and I would be able to handle such an approach. I am not familiar with micro oil futures. I use the regular CL contract, but to be honest is it a bit too large for my account size. Some examples of small-size contracts are (IB symbol codes): 3KTB (Korean short term bonds), NIFTY (India equity), XINA50 (China equity), DJ600 (Europe equity), GBS (Germany short term bonds), ZT (US short term bonds). There is also a mini-DAX futures contract. However, IB decided in their wisdom to give it the exact same symbol code as the full-size DAX contract. The prices are also almost identical. You can only tell the difference by looking at the multiplier. It is therefore very easy to mix these two up. To avoid this risk have I decided not to use this instrument.
Hey Hobby, thanks so much for sharing. Do you run any other strats besides trend following? For me I'm currently working on some mean reversion stuff for US equities. Main problem though is huge tail risk and huge bid ask spreads for equities that are not very liquid.