Offsetting strategy

Discussion in 'Index Futures' started by easyrider, Feb 13, 2002.

  1. I have only been trading eminis a short while and Globex has already gone down once. I understand that this is not a rare occurence. I'm looking for a way to protect myself in an emergency. I dont have enough money to trade 5 minis and offset with a full contract somewhere else. I do have another account with datek where options are available. There seems to be virtually no liquidity in SPY options but quite of bit of action in SPX options and lots of action in QQQ options. Am I right in thinking this would be a viable way to cover my a$$? I would be out the commissions but that would be better than taking a big hit if the market moved hard against me.
  2. Funster


    You should just have a 2nd futures broker and replicate the opposite position. Remember when it goes down you need to do this fast - no use fannying around with options or different stocks.

    Also if you have not got enough margin for this then you are overtrading size eg: if you have enough margin for 10 contracts, then the maximum should really be your 5 plus 5 for emergency in another broker.
  3. Funster


    sorry - if globex goes down - apart from full sp nd, you could try cbot as last resort. DJ/mini or DJ options. Or perhaps, if you are following closely, 10 year bond futures - normally inverse relationship when moves are big/fast in stocks (flight to quality).
    But you would have to work out the correct no of contracts. Probably based on recent volatility.
  4. tymjr


    easyrider: “I do have another account with datek where options are available. Am I right in thinking this would be a viable way to cover my a$$?”

    I’ve always offset positions with another futures account so I have no experience regarding the use of options. I did notice, though, that dottom made some interesting comments concerning straddles that I think might be more effective in certain circumstances.
  5. Re: using another futures broker. If Globex goes down doesnt it go down everywhere?


    thanks for the link. Ill check it out
  6. tntneo

    tntneo Moderator

    I think 'globex down' meant a loss of connection to globex with one broker (not globex itself).
  7. Josh_B


    A simple way to offset a position if Globex goes down, is to have an equities account, even with another broker.

    E.g. if you have position long ES you can offset with long SPY, NQ with QQQ, YJ with DIA, etc.

    You may incur some minor extra commis and maybe some hassle of moving money afterwards if move is great, but considering the alternative, it is really worth it.

    Imagine Globex down, and some surprise news come out..

  8. Josh_B


    On above post it should read

    If you have a position long ES offset with short SPY.. etc

  9. ebner


    I would like to know how does it work with Interactive Brokers when there's local emergency (ISP, computer crash, power down etc.) and position needs to be closed (assuming the markets, globex and IB operating normally). I never had to use this with IB. Would like to hear first hand experience, what are the ways to deal with this, aside from hedging via another account. I understand it is possible to place trade on the phone, not sure how well they handle that.
  10. You can trade over the phone. I've only had to do it once and it was reasonably fast. Cost $35 if I remember right.
    #10     Feb 13, 2002