I want to directionally day trade non-US indexes that don't have options available in the US (due to regulations): DAX, HSI, ESTX50 etc. When I trade ES, NQ or YM, I assume they'll go up in the long run, so I buy put options to limit loss. What can one do to protect long index future positions that don't have options?
you don't need option to limit your loss. Let's say you day trade and buy DAX at say 13000. day trade means you intend to close the position few minutes or hours later, not days later. The moment you buy, you set the stop at say 12980 (ie 20 points away). ie you already decided max loss shall be 20 points and no more. Also I don't think day traders would set huge stop of say > 30 points for dax. As price move in your favor, you adjust the stop upward. Most day traders do this way. I don't think day traders go and buy put option to protect loss. For the example above, if DAX is heading south, we cannot continue to hold the DAX position even though the put option is generating profit. you have to flatten the DAX position. for swing / position traders for stocks / futures, they might do this way.
Good point, using stop loss orders. I've used protective put options instead of stop loss orders because I don't want short-term downswings in the index to trigger a stop order. Options with faraway expiration limit downside risk (sure, at a premium), assuming the underlying will eventually bounce back - which historically has always been the case with the S&P500, for example.
Only issue with a stop might be if your stop is placed far enough away and something really bad happens which causes the market to halt trading, but before your stop is hit...then the market could open well below your stop or if during the same event, all bids suddenly disappear and your stop turns into a market order and gets filled at a fraction of the initial position's value. Highly unlikely to happen, but just to point out that stops don't mean that you get filled at the stop price whereas having long options guarantee a fill at the strike price if exercised.
seems like we trade differently. all my futures trading are with stop loss orders. If you see my trade journal which I posted in ET, u notice that I focus very heavily on timing and trendliness / messiness / jerkiness of market.
Stops will get hit, and will often reverse. Just accept it as part of the business, move on, and realize that it is the price of protecting yourself from possible catastrophic losses. And try not to get into the habit of jumping back in, hoping you can recover a loss. That isn't a good long term strategy, either for your account, or your sanity.
The way to avoid 'catastrophic losses' is to size your positions appropriately. Trade with your head, not over it.