the operator (tim) said...how did you trade before the emini's? normal SPU is 250x index... I only ask because you have been trading for many years?That's a good question, Tim.
I started trading the S&P's in 1982, just a week or so after they were introduced in April of that year. You have to keep in mind that then the S&P was trading in the low 100's. Not only that, margin requirements were similar to commodities. So if I remember correctly, you could trade 1 contract, at 500x the index (nominal value about $60,000 if the index is at 120) by putting up 2000 or so. So in those days 1 unit for me would be 1 contract per ten thousand dollars of account size.
But then along came the 1987 crash. Margin requirements went up dramatically, so when the index was trading around 300, at 500x, nominal value about 150k, you had to put up 10k, sometimes a little less, sometimes more. If margin were 10k, then if I remember correctly I would trade one unit, one contract, per 30k of account equity.
You can see the basic idea. I want to trade 1 contract = 1 unit per roughly 3 or 4 times the overnight margin.
This leaves room for a second contract carried overnight plus a reasonable drawdown.
2 comments:
I started trading in 1985 and also lived through the 1987 crash but spent almost my entire life in currency options, including such memorable events as when the Indonesian Rupiah went from 2000 to 12,000 in a week. The most rrumatic in terms of options was 1998 when usd jpy colapsed by 10% in 2 days and every bank in the world was short calls. I was selling approx $500 mio usd an hour, every hour, round the clock to keep up with the negative gamma. Catherine
Carl, I think you better close out your short, the market is trending up.
Post a Comment