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CL vs QM (crude oil) tick size/value, margins


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CL vs QM (crude oil) tick size/value, margins

  #11 (permalink)
 vagus 
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How many ticks of slippage do you get for CL, and are you referring to per Trade or per Fill?

Just trying to get a realistic number for backtesting.

Thanks.

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  #12 (permalink)
 
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 Big Mike 
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vagus View Post
How many ticks of slippage do you get for CL, and are you referring to per Trade or per Fill?

Just trying to get a realistic number for backtesting.

Thanks.

For CL you can usually just figure 1 tick of slippage -- buying @ the ask on either side, per contract.

For QM, the slippage can be higher because of the way the spread works with CL, it could be 2-3 ticks per contract.

You should not trade CL until you have many years of experience. And you should probably use a limit order and not market even then.

Mike

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  #13 (permalink)
 
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 Fat Tails 
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The only tradeable alternative to CL would be Brent Crude (BC). Brent volume during the European session is comparable to volume of CL. Cumulated daily volume is about one third compared to CL. Ticksize and contract size are comparable (attention: NT7 instrument settings seem to be false).

The chart below shows volume of both crude contracts during the European session and the spread between the two prducts below. I have put the spread just to show that they can be traded as a substitute.

Trading this spread directly using a mean reversion strategy does not make sense for one reason: time lag.

CL has Cushing, Oklahoma as a delivery point, the pipeline is never pumping crude back to the Gulf, so there is only one-way physical arbitrage possible: shipping Brent to the Gulf Coast. A spread therefore would have to be defined as (A) contracts CL 06-10 plus (1-A) contracts CL 07-10 - 1 contract BC 06-10, just to account for the voyage time between the Atlantic Basin and the Gulf Coast. Maybe I will test NT7 to build a synthetic spread from the three data series, I am sure NT won't be happy.

The resulting spread should then be tradeable intraday using a mean reversion approach. As Brent Crude and WTI are different qualities, the spread between CL and BC will also be affected by the crack spread or a light sweet crude at the Gulf Coast. This induces seasonality due to demand shift between summer and winter season.

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  #14 (permalink)
 jstnbrg 
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I have been trading QM in sim and I've had DOMs of both QM and CL next to each other. It looks to me like QM bids and offers are coming from autospreaders for the most part. If CL is 90.26 bid at 90.27 ask, there will be a 90.25 bid on QM and a small 90.275 ask on QM (small because the arb is only 1/2 cent). If CL is 90.25 bid at 90.26, there may or may not be a 90.25 bid on QM but there will be a large 90.225 bid on QM and a large 90.275 offer, as you would expect from someone trying to make free money.

Sometimes there is a substantial standing bid or offer on QM, especially after the RTH close of CL. Earlier this week there was a ~70 lot standing bid on QM. Occasionaly CL would trade 1 cent lower than that bid in small size. It took about 20 minutes before CL broke enough for the QM bid to be taken out.

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  #15 (permalink)
 
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 cory 
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QM movement seems sticky that leads to more than 1 tick spread.

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  #16 (permalink)
 
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 zxxaxz 
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Cushing connection: TransCanada The Keystone Connection - Preview

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  #17 (permalink)
 RM99 
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1) The reason it's better to trade CL vs. Q's is because of the commission burden.

As pointed out earlier, the QM's are simply "half" a CL contract. Example:

If CL moves 5 ticks, the profit realized/lost is $50 (1 contract). The corresponding move would be 2 ticks (2.5c/tick) for the Q, resulting in $25 profit/loss.

However, for both transactions, the comission is the same. Therefore, a typical futures contract commission of $5 round trip, would be a 10% burden for the CL transaction, but a 25% burden for the Q transaction.

The only reason one would trade multiple Q's would be if the commissions were comparable (if you have a broker that will do that I have not seen/heard of it....although that doesn't mean it doesn't exist).

It goes without saying, that if you can't afford to trade a single CL contract, then you probably are either not qualified/prepared to trade oil futures or you're an oddity in that you have the knowledge/experience but not enough capital to do so.

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  #18 (permalink)
 RM99 
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2) There are 2 types of slippage. Computer lag/momentum slippage occurs when the market is moving so quickly, that the trade server lags behind the physical trade price. For example....if you have a sell limit order at $100.00 and the current price is below and there is a SIGNIFICANT up volume thrown upon the market, it's not uncommon for you to get "filled up" beyond $100.00. I've personally seen momentum slippage as much as 6 ticks before.

This really isn't an issue if you're trading strategy incorporates bracket orders....generally, over a long period of time, it comes out in the wash (kinda like how the IRS rounds to whole dollars, sometimes they win, sometimes they lose, but on a large scale, it's inconsequential).

However, if you're utilizing a bottom side exit strategy only (i.e. trailing stop loss only), then momentum slippage is always a negative impact, because you're stop is always on the bottom side of the trade (i.e. when you're taking profit, it's potentially less profit and when you're stopping loss, it's potentially more loss).

The second type of slippage is spread. Spread has varying degrees of effect based upon the immediate volume. For instance, during certain hours when the US and European markets are off hours, you can literally "move the market" with a few contracts. However, during peak volume periods, you can enter with several contracts and the market has existing orders to cushion the entry. I.e. during/after news events, you can place an order for 100 contracts and not see the price move more than a couple of ticks because the outstanding orders for each price tick are tens if not hundreds of orders.

Lastly, slippage depends on the trade entry. Market orders obviously are advantageous because you ensure that your order will be filled (however you have less control over the price). Limit orders eliminate spread slippage (but not necessarily momentum slippage like outlined above), but you trade price control for the risk that your order may not fill immediately. (partial orders are also a nuisance when dealing with automated trading systems). (it's noteworthy that if you get a partial order fill or no fill at all, then it's really a blessing because the market obviously didn't go your way). Market orders are subject to spread slippage.

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  #19 (permalink)
 raduku 
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Hello BM & everybody !

Good work here BM !! and all !! al my respect .

I have a quest (hope no too offtopic-well,this is my first post here so please have mercy ) : know someone a broker who offer the micro crude and brent contracts (so,not mini) MCL and MBZ ?And maybe some details like open interest , dayly volumes , a RT and overnight margin , cause i'm pretty confused ..if i buy 1 barrell(or 257,the number is not important) how much money will be block overnight from my account? or if the minimum amount is 1 barell how much could be the RT ? I'm interested in to trade live (accomodation , etc. but don't wannt to try QM-don't like 2.5 spread and could be a much expensive live course) before try to trade live the big beast (CL) .

Here is a link from CME https://www.cmegroup.com/tools-information/lookups/advisories/market-data/files/MicroCrudeOilFutures_New_Product_Summary.pdf

Until now , Mirus said no offer and Optimus,AMP,Velocity,Infinity are very quiet .

TYA

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  #20 (permalink)
 
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raduku View Post

Hello BM & everybody !

Good work here BM !! and all !! al my respect .

I have a quest (hope no too offtopic-well,this is my first post here so please have mercy ) : know someone a broker who offer the micro crude and brent contracts (so,not mini) MCL and MBZ ?And maybe some details like open interest , dayly volumes , a RT and overnight margin , cause i'm pretty confused ..if i buy 1 barrell(or 257,the number is not important) how much money will be block overnight from my account? or if the minimum amount is 1 barell how much could be the RT ? I'm interested in to trade live (accomodation , etc. but don't wannt to try QM-don't like 2.5 spread and could be a much expensive live course) before try to trade live the big beast (CL) .

Here is a link from CME https://www.cmegroup.com/tools-information/lookups/advisories/market-data/files/MicroCrudeOilFutures_New_Product_Summary.pdf

Until now , Mirus said no offer and Optimus,AMP,Velocity,Infinity are very quiet .

TYA

I really don't fully understand your question, sorry. But I think you are asking what the overnight margin is. Your broker can tell you this, most have pages on their websites that list margins.

If you trade overnight or hold a position through the cash close, overnight margin will be in effect and you must have sufficient funds in your account or the position will be closed.

For example:
NYMEX Futures Commissions | Velocity Futures

Overnight on QM is 4219, while intraday is 1500. So to trade this contract overnight you need 4219 in your account per contract. To hold a position past cash close, you need 4219 in your account per contract.

I would recommend you double or triple the broker margins as an absolute minimum for your own safety and sanity.

Mike

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