Profitability: SP versus ES

Discussion in 'Retail Brokers' started by sdaymond, May 19, 2001.

  1. sdaymond

    sdaymond

    I am currently trying to determine how trading S&P 500 futures contract (SP) compares to emini ES contract.

    It seems that some systems designed for SP will not work with ES. If we take into account Interactive Brokers, then the broker costs ar not that high for ES (2.95 one way), so trading 5 ES contracts (equivalent of 1 SP contact) would cost around $30. How would compare the following:
    1. Liquidity
    2. Splippage
    3. Brokerage fees
    4. Execution speed
    5. Correlation of prices between SP and ES
    6. Other factors
     
  2. vvv

    vvv

    1. Liquidity

    > great in both

    2. Splippage

    > vastly superior in emini, because it's immediate electronic execution - although "fast markets" may hold some nasty surprises, but that will disappear once the pit dies out...

    3. Brokerage fees

    > no difference

    4. Execution speed

    > vastly superior in emini, because it's immediate electronic execution

    5. Correlation of prices between SP and ES
    > pretty much the same due to arbitrage, but again beware of "fast markets"

    6. Other factors

    >i'm convinced that the pits are dying out, and that that is a good thing...

    when EUREX went electronic the EURO BUND, previously also traded on londons LIFFE in a pit, practically overnight left the pits and moved to frankfurt to electronic trading.

    cheers
     
  3. sdaymond

    sdaymond

    I found as few examples, where daytrade system is being marketed to trade SP and it says it is not reccomended to trade ES based on backtesting. Obviously there are some differences between SP and ES. I am trying to figure out what is the significant factor that makes the difference.
    If you develop daytrade system based on SP historical data would you be confident trading ES ?
     
  4. Excellent post, vvv ---- agree on all points. In very fast markets (i.e. just after FOMC announcements) e-minis are hyper-volatile compared to the big S&P and generally should not be traded at those moments because in those cases (and only in those cases) fills will be especially bad. But we're talking maybe 30 trading seconds out of every month. Otherwise, e-minis are much superior to the big contract for all the reasons vvv gives.

    Sdaymond ---- The only significant difference between e-minis and the big S&P lies in the fact that e-minis are traded virtually round the clock and the big contract for less than 7 hours a day. This often causes large gap openings on the big contract as it must adjust to overnight activity and changes of sentiment which the e-mini's continuous trading has already reflected. So if you are testing any system that involves overnight positions there can be significant differences. But if you are a strict daytrader and never carry overnight, e-mini prices and big S&P prices are so close that most systems will achieve very similar results if you test them on both once the effect of those gap openings is discounted. That's the one thing to be alert for: if your daytrading system reacts in a particular way to big gaps on the S&P data and would not react in a similar way if you had access to the continuous and much smoother prices of the e-mini then there can be major differences in the outcomes.
     
  5. sdaymond

    sdaymond

    Thank you vvv and armaniman for your comments. I am planning to trade 20 minutes bars with overnight position.
    I think it will be prudent to verify my strategy directly on ES data. I have done testing on historical SP data but I am looking for historical intraday data for ES.
    Do you know any good source ?
    I found one site (http://www.is99.com/disktrading), it seems it is a private person, I am not sure about quality of his data.
     
  6. Cesko

    Cesko

    vvv
    I used to work on CME floor, now, occasionally I go to the gallery to see the action. You are absolutely right, (specifically) S&P pit is dying out. It's more and more quiet (consistently).
     
  7. Are there options on the e mini S&P or the e mini Naz. Does all of your remarks about the emini S&P also apply to the e mini Naz - executions, tradability, etc?
     
  8. def

    def Interactive Brokers


    Yes on the E-mini's, no on the NQ's. For contact details look here: http://www.cme.com/clearing/spex/XMLReports/equityGroup.htm

    Also, someone posted that the big S&P is only available in the pits. That is true during "normal" trading hours. After hours it trades on Globex and it trades in line with the mini (usually a tighter spread due to tick increments (big contract tick is .10 while ES is .25).