Interesting test by a broker (Attain); whether 5 eminis had better slippage than trading one fullsize contract (S&P). They ran 414 trades on their inhouse systems. a 5-emini trade averaged about $13.50 less slippage than fullsize…
The actual savings in slippage utilizing e-minis instead of full size contracts was just $13.50 per trade according to a study done by Attain Capital across 414 trades on the following trading systems: Compass, LTS i-Portfolio, & I-Master on the S&P and Nasdaq. Of course, this test represents a miniscule portion of the overall trading volume in these markets, but it does encompass all of the trades taken by these systems over the time period specified below. The real-world test showed just $13.50 better per trade by doing 5 e-minis. This means that the total cost of doing five e-minis must be no more than $13 over the cost of one full size contract to make the 5 minis strategy worthwhile.
Full article was at: http://www.attaincapital.com/pdf/eminivsfullsize.pdf [note: I neither recommend Attain or their systems - performance is very lackluster…]
The article is over three years old; even back then I didn’t agree with their assertions. The article was written solely to promote their “superior execution”, which they obviously couldn’t/can’t promote for electronic contracts.
Even in their article, they note that if your commission rate is $10.70 or less you are better off trading eminis.
One thing to keep in mind is the differing characteristics of the pit and ES. If you’re trading limit-order type systems, you will actually have much less slippage utilizing MITs in the pit (often zero or even positive slippage) versus converting limit orders to market on ES (1-3 ticks slippage per side). That said, if you have a lot of cancel-replaces you’re going to be making quite a few calls to your broker.
On the other hand, unless you’re trading several hundred contracts you aren’t going to get any slippage trading stop-orders on ES. Stop orders in the pit are usually good for quite a bit of slippage.
Market order slippage is pretty close if you’re trading small size. Anything more than 10 SP contracts and you’ll start seeing additional slippage in the pit. All in all, there’s no reason to execute market orders in the pit.
Also forget electronic order entry for the pit – you’ll get terrible slippage in all cases as these orders are sloughed off on uninterested floor traders there for nothing but to fill those orders. You’ll need a real floor trader to get decent fills (the guy who tends to get in before the robo-order-fillers). You’ll pay a few extra dollars per contract, but it’s well worth it.
I definitely ignored their "execution." I was only focused on the test. That is may somewhat generic is a good postulate. But it is at least something. Personally, I favor the eminis.
I only focus on statistical/empirical evidence. Many "experienced" people tell what different things mean, but without tested/significant sample sizes, it remains an opinion.
It is like the best stops or profit targets. Some prefer trailing, fixed, mental, stops as the best. And will teach others that is the best. But unless they run hundreds or thousands through varying market conditions, they are also opinions. I am only interested in something like: we used fixed stops of $250, $500, $1000 with a simple 2-MA crossover system x held for 5 days; the average profit was $137, $182, and $145 accordingly. A $500 stop seemed superior in this case."
> On the other hand, unless you’re trading several hundred contracts you aren’t going to get any slippage trading stop-orders on ES. Stop orders in the pit are usually good for quite a bit of slippage.
I agree. I use stop in / stop out systems in the minis these days. In the old days there was a lot more slippage in the pits.
> Market order slippage is pretty close if you’re trading small size. Anything more than 10 SP contracts and you’ll start seeing additional slippage in the pit. All in all, there’s no reason to execute market orders in the pit.
Plus the problem is time. Even if you have the floor on the phone holding with you, you read your order, they read it back, and then they need to yell back and forth in the pit for your fill. With the emini you can have an order parked and ready and ping: you are filled.
For me it’s been a while since I traded the pit. Volume is getting lighter…can’t imagine fills are better now than they were.
