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In terms of reducing slippage the best order is a limit spread order. In a
deep liquid market it probably does not matter if you use a limit spread
order paying the offer or selling the bid, or a market order.
However, in some markets there are some finer spread ticks that trade which
give you greater refinement in your potential fill.
For example, the bonds trade in 32nds, but when you roll over the spot month
may be traded in 1/4 of a 32nd. Or emini S&Ps trade in 10 point increments
as a Globex spread rather than the .25 you would pay executing both orders
outright.
Many markets have traders who specialize in spreading. Much of the
Eurodollar trading is done as spreads with various dynamics and names for
each.
The other thing to consider when rolling over is whether you will be exiting
the position in the next few days. If you are holding a long term position
and will not be exiting your trade soon, you may be better off looking at the
spread chart ahead of time and making a decision about an optimal spread
price or timing. The optimal point may not come the day before rollover. In
fact, that might be the worst day. So you need to plan ahead, make a plan
and execute that plan.
Regards,
John J. Lothian
Disclosure: Futures trading involves financial risk, lots of it! John J.
Lothian is the President of the Electronic Trading Division of The Price
Futures Group, Inc., an Introducing Broker.
In a message dated 3/11/02 11:03:31 AM Central Standard Time,
dickjohnson3@xxxxxxxxxxxxxx writes:
<< In terms of reducing slippage, does anyone know the best type of order to
use at rollover? For example, is it best to use market orders to close the
existing position and enter the new one. Or, would using a spread order to
combine the two orders into one order reduce slippage. Seemingly, the latter
would be preferable, but can the difference even be measured?
Thanks,
Trey Johnson >>
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