worst 1-minute return on S&P500?

Discussion in 'Automated Trading' started by garchbrooks, Feb 20, 2010.

  1. I haven't been trading long enough to have experienced a 9/11 or a 1987 crash. Can someone tell me what the worst ever 1-minute S&P future return was, or the biggest 1-minute spike in terms of the VIX was, in terms of percentage?

    How fast does one need to be in terms of automated systems to clear out in terms of execution now? In theory, the markets could go illiquid and blow up, but when the dow was dropping 1k points, even the 1-minute bars seemed orderly in 2008. At work, we were all on red alert and even our mediocre execution platform seemed to avoid getting run over in 2008.
  2. There have been a number of 10+ point moves inside of one minute.
    Lots of gaps between trading sessions. ES has limited down halting trading a few times.

    Just cover each of your positions with a safety OCO Order for taking profits, reversing or stopping losses in the event of connectivity issues or rapid market movements.

    The biggest losses we have ever incurred were due to technical issues and the inability to place or execute orders. Having safety orders resting in the exchange limit order book for each position mitigate much of the order execution risk. Program your algo to monitor and adjust these safety orders as it runs.
  3. quotes could be halted if the order flow becomes just one way.

    in those circumstances an index future could resume a couple of seconds/minutes later 10% or so lower.

    i trade the dax future for more than 10 years and have seen that happening at least three times.

    the last was when the senate first voted no for bailout of the banks. IMO you should consider a 10% or more intraday gap is not an outlandish scenario, for risk purposes.

    the DAX is highly correlated wit the ES with about 1.6X more vola, i'd assume that the fat tails are less pronounced there but would not rest on it.

    also, if trading automated, the risks are amplified due to the lack of rational understanding by the algo of what is going on. you cant code these events into the the software easily because you don't know how they'll unfold and because in some cases the algo is not allowed to trade anymore until the market resumes quoting prices. in such case, you might get the worst possible fill at market on the low extreme of the day or not get filled at all due to API/FIX connectivity problems at the level of the FCM/exchange. unfortunately the murphy's law applies here like a glove.

    by experience, my suggestion is trade small size as an event like this can wipe out years of successful trading in a blink of an eye.
  4. I figure the HFT players are capable of stepping out of the way faster, but they also put a lot of garbage all over the book too. My concern is throwing out a market order and having it go like the starship enterprise at warp 9 through a vast space in the book, only to crash into planet $99999999.99 or $.01 [extreme example, I know.]
  5. CME Market orders use a "Market with Protection" approach. Unlike a conventional Market order, where you are at risk of having your orders filled at extreme prices, Market with Protection orders are filled within a predefined range of prices (the protected range).

    The protected range is typically the current best bid or offer, plus or minus 50 percent of the product's No Bust Range. If the entire order cannot be filled within the protected range, the unfilled quantity remains on the book as a Limit order at the limit of the protected range.

    No Bust range is 6 points for ES. / Protection applies to fills > 3 Points from best bid or ask. You have 8 minutes from the time of the trade to request a review of any trade with > 12 ticks slippage.

    See Rule 588 for a full list. http://www.cmegroup.com/rulebook/CBOT/I/5/88.html
  6. IIRC 11/7/2008 was the last time the S&P opened limit-down.
  7. maxpi


    I don't think that stops for the ES or anything trading on Globex are exchange resident though... they were before the merger. I guess it's probably all fine except for the rare case where your broker loses connectivity
  8. OCO's are broker managed but the component orders (Stop, Limit etc) rest in the exchange order book. Might vary by broker ie. IB Smart Routing.

  9. 1) The "1987 Crash" opened about 10% lower on the open.
    2) 9/11 "only" opened about 7% lower on the open.
    3) I believe there was a day in October-2008 when the Dow opened about 11%, (900 points or 80 S&P handles), higher on the open. Combine that with "20 times" leverage and things can get ugly very fast. :eek:
  10. rcj


    I think this was the SocGen event. Not sure now.

    <img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=2740755>
    #10     Feb 22, 2010