Well if you actively trade the S&P 500 futures than you already know by now that the contract size has been cut in half. What does this mean? What are the details of this change and how does it affect the S&P trader? I will attempt to answer that in this weeks article.
For any open positions after October 31, 1997 the exchange will double market participants' open positions and will halve the underlying value and performance bond requirements. The underlying value of the contract will be reduced from $462,125 to $231,062 at recent index levels of 925.00. The action will not affect the price level of the S&P 500 stock index, the U.S. equity benchmark. The minimum price increment (tick) for futures and options contracts will increase from 0.05 to 0.10 index points. This change in tick size will have the effect of maintaining the value of one tick at $25.
What does this trader think? Well, Im not too excited about this, since I trade S&P futures and options on a regular basis. Firstly, I don't beleive the remarks by the exchange that this will "help the investor" by reducing risk and volatility. Most directional traders will just double up on their positions and have the exact same risk as before. What about all those new traders that will be able to finally trade the S&P at half the margin as before. After the recent turbulance, margins have doubled, and after the split, are nearly the same as they were a month ago. I don't expect to see any new traders enter the S&P soon.
So who benefits? Brokers @ Clearing firms just got a big revenue increase due to the increase in volume from all areas, whether institutional, large speculator, or small trader. The second entity that will ultimately benefit will be the exchange in the area of exchange fees. I don't see either of these two groups cutting fees at all to "help the trader" as they say that this split will do. What about the floor trader? Well they got a big paycheck as well. Although the contract split in half, the tick value did not split -- in fact the tick value increased to 10 cents from 5. Talk about a raise!
Hmm... Knowing all this I think the best thing to do now is to buy a seat on the CME. Its just one "upstairs" traders opinion. Good trading!
Hiç yorum yok:
Yorum Gönder