:::grimReaper:::

In terms of the underlying's bid/ask, what makes an option ITM? For example, if the underlying's bid/ask is at 99.97/100.05, and we're considering a strike of 100, is a call/put option ITM? Or does the bid have to exceed the strike for calls and vice versa for puts?

How many trades? How much risk of capital per trade?

According to table (attached pic) from this paper: https://sceeto.zendesk.com/attachments/token/nakjp4gnkvimi8a/?name=The+Trading+Profits+of+High+Frequency+Traders-+Baron-Brogaard-Kirilenko.pdf HFT ainec, at least when just measuring the ES

Conceptually, fixed 6% coupon makes sense but my #s don't tie. As of Friday, ZF closed at 124-225 and according to Bloomberg, 5 Yr Treasury traded around 100-5.5, yielding 0.59% According to my calculations, 5 Yr Treasury that pays 0.625 coupon yields 0.607% (close enough to 0.59 I guess). But when I calculate the yield of ZF trading at 124-225 at 6% coupon, I get 3.09%, much higher than 0.607%. Why?

Thanks Ninja. I think you might have the right answer, but can you elaborate mathematically about the "6% yield." Still a little confused:crap:. For example, I thought market prices for bonds mathematically determine the yield, but here it seems like CBOT set the yield to 6%.

Always wondered why this was so. For example, according to bloomberg (http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/): 5 Year US Treasuries trade at 99-0975. But ZF is trading at 123-31

However, don't you have more "smaller moves" the smaller the ticks are? For example, if ES had 0.01 ticks, price could fluctuate +/- 0.10 several times, whereas our 0.25-tick ES wouldn't budge.

No need to worry: http://www.cmegroup.com/globex/files/PriceBanding.pdf The FIFO in NT is just an accounting mechanism that you can choose to use or not when scaling in/out contracts. The FIFO in the context of matching algorithms means it's first-come-first-serve in getting your limit orders filled.

Does anyone know which matching algorithm CME uses? Here's a list: list:http://ftp.cmegroup.com/globex/introduction/features-and-functionality/elements/matching-algorithms.html And do those who have seats have priority in getting filled?

I doubt it, I believe HFT have an edge (you're implying) when the spread is several ticks wide. 0.20 ticks are large enough to seal the spread. I wasn't saying otherwise. I mentioned "spread of one" because I believe the reason the tick size are so large is to allow the big boys to trade with minimal slippage. As I recently found out, the tick size use to be 0.10 and the contract size us to be $250. Increased the tick size and decreased contract size is consistent with my theory. Btw, do you believe ES is tradable if the tick sizes were 0.50 or 1 point?

True. I believe the spread is 2 55-75% of the time and 1 the rest of the time. But I'm not that considered with a spread of 2, I can place an order inside the spread and be first to be filled. I wish the ticks were 0.20 on the S&P. Small change, but it would it allow better fills and more # of ticks to play with, while likely still maintaining 1 tick spread. Has CME ever made changes like this?

I made a few trades on the YM this week and some in December. I feel there is more flexibility in entering/exiting trades. And if one's scalping (profit target ~1pts on ES), they should obviously trade YM, b/c the YM will go 10pts, giving 10 areas to exit the trade, vs. 4 ticks on the ES. In fact I looked at 5min bars from 11/28 (after Thanksgiving) to 12/21 (when volume died out) during RTH, the YM has a range of 16 ticks on average while the ES has an average of 8 ticks. However, as mentioned a few times itt, ES is more technical (S/R) and suits me. Since I'm pretty sure YM and ES are the most closely correlated equity futures, hypothetically you could trade YM looking at the ES, which was sort of what I was doing, but it felt awkward and there's less screen space. I'm looking forward to going solely back to ES.

But how exactly does it work? A broker who wants to go long joins the sweaty pit trying to find enough locals who are selling? If so, then how does the exchange know the best bid/offer? Oops, I meant the big S&P. Of course, just interested in how things were/worked.

Very interested in it. 1) How does it work? Do traders yell and signal and update a central desk with their bids and offers? Or is it more decentralized, i.e buyers try to find sellers among themselves? 2) What are the spreads and volume like? What were they like 5-10 years ago? 3) What tools do they use? How are prices coordinated with globex to prevent arbitrage? 4) If you worked or traded there, I'm interested in any stories or experiences you have to share. Thanks

Where? I believe he doesn't include that as part of the free package.

Read this whole thread, and no one mentioned this, ironically other than the OP: there's also more volume. Create a rough ratio of TradeVolume:BestBidorAskVolume and compare. Below I used very rough estimates of the best bid/ask sizes, keep in mind I only trade the ES so that's what I'm most familiar with. TradeVolume is today's average volume on a 5min chart from 9:30-12:00est. The numbers below look very close if you consider statistical noise. Furthermore, given that the numbers don't include slippage (ES never has a spread greater than 1 tick in the day), ES looks better. And no, I don't feel like a badass trading the S&P, maybe if I trade it in the pit or trade CL/6E (controlling 125000 euros yo). ES: 26k/400 = 65 TF: 1500/30 = 50 YM: 1500/25 = 60 NQ: 3100/40 = 78

The S&P surprisingly gaps up just under 40pts premarket on Monday in midst of a short term downtrend (and lolCNN claimed it's due to good Black Friday sales). And today the Fed made an announcement causing it to gap up more. Could have the Fed's plans today triggered insider trading on Monday?