Mexico IPC Index futures

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ptan54
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Mexico IPC Index futures

Post by ptan54 » Sun Sep 14, 2014 1:23 am

As we all know, Equity indices tend to be very correlated with one another. Some people deal with it by trading only the big indices. I try to find as many "weird" and liquid enough markets as I can. I have been on a quest to find some "less" correlated index futures (less correlated with the liquid usual suspects, ES, NQ, ESTX50). SGX offers Taiwan and India futures which tick the box.

Just wanted to ask the collective wisdom here whether anyone has traded Mexico IPC futures? When browsing thru the product offerings on my broker's website I came across the Mexican IPC index futures.

From my observations the past 2 weeks I have noticed the following:

Pros -

At ~1000 contracts a day it is tradable for a small account.

Quarterly roll, so we don't have a monthly headache.

Cons -

Bid/Ask spread can be big. 50 points or above on a 46,000 level index, it's under 0.5% but the gut feel is screaming SLIPPAGES WILL BE BIG!

Contract size of MXP10 per point also means it's a small contract, i.e. will be trading a higher # of contracts to get the same risk exposure as ES or NQ.

Thanks in advance for any advice/pointers/tips!

Uncle Fester
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Post by Uncle Fester » Mon Sep 15, 2014 5:39 am

This market opens an hour before the US index futures (0730 vs. 0830 Central) but there appears to be no trading until the US opens. The bid-ask spread in that period is terrible. Consequently, if you submit an on-open order it will fill at (quite possibly) the worst price of the day. During the session the spread is erratic: it can go from 5 points (the minimum) up to 50 points. It does this frequently.

Perhaps my opinion comes from bitter experience -- see that trade on July 21st in the Sept contract? That outlier at 44900? That was me, with a MOO order :oops:

For me, the relatively small diversification it gives to other index futures is minimal and certainly not worth the angst of trading it. YMMV

On the wider subject of stock index correlation I believe you're spot-on with identifying the "weird" markets (check out SSG-Singapore, along with Taiwan and India on SGX). There are some which offer low(er) correlation but the real-life mechanics of trading them - with slippage etc - can negate those benefits if one is not ruthless. I guess it depends on the system being used but if your correlation filter prevents entry into a big index, such as ES, because you're already in IPC Mexico, you may want to prioritize in order of liquidity.

If it helps (and you're not already too far down the trail of deciding which stock indexes to include) here's my list:
A50,AEX,ES,ESM,FCH,FDX,FFI,FTX,HCM,HIC,IND,IPC,JTI,KOS,MFX,MXM,NK,NQ,O30,OBX,RM4,SDX,SIN,SMI,SSG,SSI,STW,SXE,SXF,SXX,TF,YAP2,YM
Any one of this could be traded but I leave it to the correlation filter (and others) to decide.

ptan54
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Post by ptan54 » Thu Sep 18, 2014 12:44 am

Yikes....I'll stay away from Mexico then. Thanks for the tip!

SGX provides a lot of the "weirder" and less traded markets, but there's only volume for SSG, A50, NIFTY and STW. Indonesia is promising because it's not correlated with the broader US/European markets but there's no volume. I am contemplating running a long only variant of my system on the Indonesian ETF to get exposure to that.

KOSPI is another market that marches to the beat of its own drum but at ~$5000 per tick it is too big for my account.

Cheers!

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