But wouldn't the lead/lag and higher cost lose that advantage? So, basically it's good for lower volumes? Makes sense I guess up until the point where transaction costs are too high for daytrades...
what lead/lag? this thing is arbed by bots instantly. As far as volume goes, I have never been a situation where I thought 'gez, I want to clean up the book for several levels but I'm not sure the liquidity is there'. For 99% of daytraders, one level of SPY is enough to max out their intended size. Sure, if you are a huge player, go to ES. Keep in mind there is no tax difference between SPY and ES for me. For other people it could be different. I"m non-US so I dont care tax wise about which one I use
Its all about the cost of carry which is dynamic depending on the interest rates and the dividends on the SPY. It costs me a lot less in commissions for a RT of 500 SPY shares than for the emini, but the tax advantages make the emini more attractive - if I was holding longer than a year the SPY could make more sense depending on the COC for that time period.
I have seen no evidence that during normal trading hours that ES leads the SPX cash which represents the basket of stock's actual prices, more than the other way around. Or, that SPY is can be deemed 1st all the time. I'm also not sure how a manual trader can get any value or be harmed when one comes before the other. Keep in mind that you would need a very large SP, ES or SPY trade to move all stocks in a material way. I assume there are times of the day when all of them can be first.
There is an added value to ES vs SPY. if you are an american taxpayer. SPY would be short term rates and ES is a 1256 contract, 60% LTG/40%STG. This can be a big deal when your income rises. You can also get more leverage with ES with a small account. We offer up to 25% of SPAN margin with an account of $25K or more. If you drop below $25K in a futures account, no DT issues like stock trading. To get close to that with SPY, you need a PMA with a starting balance with us of $175K or more. If I were a day-trader with a focus on indexes, I would choose to focus on futures.
My observation too. Seems the ES is able to post price changes more quickly... because of the time it takes for trades to get posted to the tape.
Is there an alternative to the SPY that is cheaper per share? I use a 2X ETF in my 401k - SSO $78 (long)/ SDS $15 & (short). 478
This would be the way to go, SPY Options have excellent liquidity and with so many expirations you can tailor the position to fit your trade. Just make sure you read up on the CBOE website on how options work and spend some time on paper first. If you want to jump up in size you can trade the SPX options which are ten times larger.