SPY and ES

i have done exactly this comparison more than a handful of times over the past couple of years and in general end up sticking to ES (mostly for actually another reason also; cost of carry). Lets see..

for one of my strategy its got an average ES profit of 0.41ticks which translates to 4cents per SPY share. Now this does not include a random occurence where i loose a trade due to my limit price not being hit; accounting for that ES ave is .32 ticks and spy say at 3cents.

So say i want to compare 1tick in ES vs now 3cents for SPY.

For a delta of 50ES points i have to trade 1ES contract or 500 shares of SPY
Commisions: 4.40$ round trip on ES (on Mirus/ down to $4 if you use IB) - vs - (.005*500)*2 = $5 round trip if i use IB for stock trading
Commision wise they are comparable.

Trading cost: need $500 (at Mirus) or $1500 at TOS (for intraday holdings) for ES contract but to hold the same position using SPY i would need roughly - ($130*500)/2 = 28k with 1:2 margining and $14k even with a 1:4 margining.

Now trading multiple contracts is out the picture with such high requirements. That aside, for SPY you have to worry about wash sales etc; even if you file as a trader for tax purposes its a pain to keep track of it all for taxes. And then there is the 40/60 advantage with futures.

So all in; i wish ES trades with lower spreads; say in 5c increments instead of in quarters; but even without it its a better proposition than SPY atleast for me. Always searching for markets liquid though - but none are more liquid than ES and now i am moving slowly into 10yr bond futures and a couple other markets and kind of i am not worried about ES liquidity anymore. Those other markets kind of suck; but thats another story for another thread.

 

Looks like a good analysis here. I'm wrestling with this issue myself. But let me throw a twist in there. For the most part, other indexes, such as the Russell 2000 behave much like the S&P 500. There is a 3X leveraged ETF that trades the Russell with the ticker TNA. (and its counter-part TZA). Given that one could trade TNA and TZA with 50% leverage and pretty much play the same market movements, does that change your answer? Why or why not?

TIA,

SM

 

i did a quick check on TNA and i still have a 4cent ave profit but that thing trades with a 4-5-6cent spread. Useless.

Infact trading the russell is much better than the comparison between SPY and ES. Because with high vol my system has slightly better averages. In this case for the same time periods tested, ave russel profit is almost 1point (0.93).

ps: That apart i typically stay away from leveraged etfs. They track sometimes; sometimes they dont. For intraday i think they are ok; but why take that chance; trade the product directly instead of a complex instrument someone has created with a bunch of option positions that are supposed to track the instrument.