Alert

BIG TECH EARNINGS THIS WEEK! Find out what to expect.

"Reducing Trading Costs in Expensive Markets" Takeaways

Oct 30, 2020

By: Frank Kaberna

Futures dude and tastytrade host Frank Kaberna takes tradeTALK part 7 to product efficiency and beyond! Learn the history of product construction from futures to exchange-traded funds (ETFs) to now, and find out just how important it is to choose the tradable market that’s right for you.

tradeTALK Key Takeaways|
Episode Seven
Reducing Trading Costs in Expensive Markets w/ Frank Kaberna


The bullish action seen in stocks, bonds, and gold over the last decade didn’t just hurt bears, but it made life harder for all traders regardless of their opinion. Every dollar higher means another dollar required to trade traditional stock products and multiple dollars added to already-large futures. It’s almost as if every rally slightly raises the barrier to entry with it.

Screen Shot 2020-10-27 at 8.16.16 PM.png

(graphic at 1:35)


The 2010s saw an over 200% appreciation in major stock indices, not to mention 55% and 75% higher in bonds and gold, respectively. While the ascent in asset prices certainly delighted buy-and-hold investors, it’s come at the frustration of active traders attempting to profit from short-term speculation on appropriately sized products.

Some of the most popular futures of the past now carry weights well in excess of $100,000. Exchanges are racing to downsize their old products to fit the growing class of individual traders, but in doing so, they are creating a Frankenstein’s monster of contract specifications that confuse even the most experienced traders.

unnamed-4.png

(graphic at 4:15)

No matter if it’s mini or micro, traditional futures are still too large for most, and the efficiency known only to futures can be problematic when paired with this size. Recent outliers, which occur a handful of times per year, would have resulted in tens of thousands of dollars in account fluctuations for just one contract.

unnamed-5.png

(graphic at 6:15)

Many everyday traders find relief in the growing number of exchange-traded funds (ETFs) that allow for fractionalized exposure to markets. However, the ability to reduce size comes at the expense of greater costs - ETFs require ten to twenty times more capital than futures.

unnamed-3.png

(graphic at 8:50)


While options afford traders some flexibility, the baseline of 100 shares can get expensive for many. All the products of old lend some advantages but always at a cost to the smaller trader, which is why the Small Exchange took it upon themselves to make a new kind of product.

The Smalls offer the low costs of futures at a more manageable size. Gone are the days of choosing efficiency or flexibility. True empowerment is here from the Small Exchange.


Watch Episode 7 and tune in next Thursday, November  5th at 3pm CT for Episode 8, Reducing Trading Costs in Expensive Markets w/ Jenny Andrews.


Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Related Posts

tastytrade content is provided solely by tastytrade, Inc. (“tastytrade”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. tastytrade, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastytrade is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. tastytrade is not a licensed financial advisor, registered investment advisor, or a registered broker-dealer. Options, futures and futures options are not suitable for all investors. Prior to trading securities products, please read the Characteristics and Risks of Standardized Options and the Risk Disclosure for Futures and Options found on tastyworks.com.

tastyworks, Inc. ("tastyworks") is a registered broker-dealer and member of FINRA, NFA and SIPC. tastyworks offers self-directed brokerage accounts to its customers. tastyworks does not give financial or trading advice nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastyworks’ systems, services or products. tastyworks is a wholly owned subsidiary of tastytrade, Inc (“tastytrade”). tastytrade is a trademark/servicemark owned by tastytrade.

Quiet Foundation, Inc. (“Quiet Foundation”) is a wholly-owned subsidiary of tastytrade The information on quietfoundation.com is intended for U.S. residents only. All investing involves the risk of loss. Past performance is not a guarantee of future results. Quiet Foundation does not make suitability determinations, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of Quiet Foundation’s systems, services or products.

Small Exchange, Inc. is a Designated Contract Market registered with the U.S. Commodity Futures Trading Commission. The information on this site should be considered general information and not in any case as a recommendation or advice concerning investment decisions. The reader itself is responsible for the risks associated with an investment decision based on the information stated in this material in light of his or her specific circumstances. The information on this website is for informational purposes only, and does not contend to address the financial objectives, situation, or specific needs of any individual investor. Trading in derivatives and other financial instruments involves risk, please read the Risk Disclosure Statement for Futures and Options. tastytrade is an investor in Small Exchange, Inc.

© copyright 2013 – 2021 tastytrade. All Rights Reserved. Applicable portions of the Terms of use on tastytrade.com apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastytrade’s podcasts as necessary to view for personal use.