-
Stocks Options Futures
Minimum acct. balance to day trade
$25,000 $25,000 As low as $3,000 (depends on broker)
Leverage Between 0x and 2x
Around 15x for ATM option
Between 8x and 87x
Equivalents 500 shares 10 ATM calls 1 future contract
Capital gains: daytrading
100% short term
100% short term
1256 contracts = 40% short term 60% long term
Non-1256 contracts = 100% short term
-
� No pattern day trading rule
� Efficient use of capital
� 1256 contract means 60% gains/losses taxed at long term rate
� VOLATILE!
-
� Futures trade on margin
� Initial margin amount is set by the exchange and is subject to change
� Example: ES is set by CME at $5,625 per contract
� Each future has a different tick amount, dollar value per tick, and trading hours, expiration dates
� Know these before considering trading a specific future
-
� Futures are speculations about future prices, NOT what the future will actually bring
� Always a buyer and seller
� No difference between buying and selling
� Contracts have expiration dates similar to options� But no greeks (other than delta)
� At expiration, held contracts must be performed� Goods exchanged, cash settled, etc
� Never hold over expiration!
-
� /XXY#� XX = Symbol name
○ S&P 500 e-mini = ES
� Y = month code○ June = M
� # = last digit of the year○ 2009 = 9
� Example: � June 2009 S&P e-mini = /ESM9
-
� Commodity Futures� Gold, Corn, Wheat, Oil, Natural Gas, etc.
� Index Futures� S&P 500, Dow, NASDAQ, Russell 2000, FTSE,
Nikkei, etc.
� Forex Futures� Euro, Pound, Yen, Aussie, etc.
� Interest Rates� 30 year Treasury bond, 10 year, etc.
� Weather� Cooling, Heating, Hurricanes, Snowfall, etc.
-
� Trader puts up a performance bond (margin) to guarantee against losses� ES - $5,625 initial margin controls $43,300
� Gains and losses are settled immediately
� Margin call if account less than 80% of initial margin
� Intraday margins are set by the broker (like TOS) and not by the exchange� These vary from as low as $500 to as high as the
initial $5,625
� TOS is 25% of the initial margin = $1,406.25 (30x leverage)
-
� Most liquid of all futures products
� Widely followed and discussed
� Best representative of the market as a whole
� Best way to introduce yourself into the futures market
� Some people make their entire living off of this one product
-
� Tick size = 0.25 point
� Tick dollar increment = $12.50
� 4 ticks per point
� 1 point = $50
� Average daily range – currently around 25 points� $50 * 25 = $1,250
� Trading Hours: 24/5� Intraday hours: 9:30am to 4:15pm EST
� Closed from 4:15pm to 4:30pm EST daily
� Weekly: Open Sunday 6pm to Friday 4:15pm EST
� For more information check out www.CME.com
-
� Volume and liquidity are very important for short term futures trading
� Bid / Ask should be 1 tick wide
� Daytraders need to get in and out quickly
� Each future has different time frames when volume is heaviest
� Examples:
○ S&P (ES) – best during US market hours
○ Euro currency (6E) best during European market hours
-
� If you trade with any volume, commissions are vital
� Scenario 1: 10 round-trip trades per day, 5 contracts, $3.50 commissions ($7 RT)
� 10 * 5 * $7 = $350 per day
� $350 * 5 = $1,750 per week
� $1,750 * 4 = $7,000 per month
� $7,000 * 12 = $84,000 per year
-
� Scenario 2: 10 round-trip trades per day, 5 contracts, $2.20 commissions ($4.40RT)
� 10 * 5 * $4.40 = $220 per day
� $220 * 5 = $1,100 per week
� $1,100 * 4 = $4,400 per month
� $4,400 * 12 = $52,800 per year
-
$3.50 comm. $2.20 comm. Savings
Daily $350 $220 $130
Weekly $1,750 $1,100 $650
Monthly $7,000 $4,400 $2,600
Yearly $84,000 $52,800 $31,200
$31,200 = Annual salary working full time at $15 per hour
-
� Using scenario 2 from before:� 10 trades per day, 5 contracts, $2.20
commissions
� Assume conservative average of 2 points per day
� 2 points * 5 contracts * $50 per point = $500
� $500 - $220 commissions = $280 per day
� $280 * 5 = $1,400 per week
� $1,400 * 4 = $5,600 per month
� $5,600 * 12 = $67,200 per year
-
� Same scenario:� 10 trades per day, 5 contracts, $2.20
commissions
� Now assume aggressive average of 6 points per day
� 6 points * 5 contracts * $50 per point = $1,500
� $1,500 - $220 commissions = $1,280 per day
� $1,280 * 5 = $6,400 per week
� $6,400 * 4 = $25,600 per month
� $25,600 * 12 = $307,200 per year
-
1. Software / Tools
2. Commissions
3. Data Feed
4. Intraday Margin
� $500 to $5,625
5. Customer Service
-
� www.mirusfutures.com
� www.thinkorswim.com
� www.interactivebrokers.com
� www.infinityfutures.com
� www.alaron.com
� www.mfglobalfutures.com
� www.pfgbest.com
-
� Futures can be fast movers
� Many futures day traders prefer to use tick or constant volume bar charts
� Warning: Prophet charts are terrible for intraday futures trading
� Recommend TOS charts or NinjaTrader charts with a good data feed
-
� Allows you to set multiple price targets and stops
� Easy visual representation of the market
� Shows depth of market (DOM)
-
� Moving Averages
� Oscillators
� Trendlines
� Price Patterns
� Pivot Points
� Fibonacci Retracements
� Value Areas
� **too deep to go into all these today**
-
� The majority of futures traders blow out their account very quickly
� Respect the leverage!
� Start in Simulation / Papermoney
� Do not hold overnight yet
� ALWAYS have a stop loss in place
� Progress to 1 live contract after consecutive long term successes
� Continue progression slowly