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Capacity limit in RUT

Discussion in 'Options' started by AKJ, Jan 4, 2016.

  1. AKJ

    AKJ Well-Known Member

    Hoping to solicit first-hand experience and opinions on Capacity constraints trading butterfly based strategies in RUT. John Locke's strategies generate some unheard of sharpes, how big could you ultimately trade before execution became a serious issue.
    Meathead likes this.
  2. TheSpeculator152

    TheSpeculator152 Well-Known Member

    @Andrew John, interesting question. I would like to hear more experienced traders' view on this. My personal opinion is that it is very scalable as the entry and exit rules are flexible.
  3. Andrei

    Andrei Well-Known Member

    Depends how much you want to scale it. JL is trading RUT $1.25 million for SMB and says he has no problem executing his trades. (Unfortunately) I have no experience trading $10 million:) and the only way I can judge the market's liquidity in RUT is by monitoring Spread Book in TOS, 100 contract trades are not unusual, but have not seen many over 100 contracts. If you have access to IB, they have better market depth information, TOS information is for their clients only.

    If you are interested in running a $100+ million hedge fund, then SPX is the only way to go. Bernie Madoff ran a $64 billion fund in SPX options and nobody noticed;).

    These are just my observation, not even close to be scientific.
  4. ACS

    ACS Well-Known Member

    Nobody noticed that Bernie was not actually making the trades?
    Andrei likes this.
  5. Trader G

    Trader G Well-Known Member

    • Karen, the trader highlighted (worshipped) on Tastytrade has a 300-400million fund that is trading far out of the money SPX options. I used to watch the old Calif trading group videos and Jim Riggio would show his position and adjustments from time to time. I tried adding up all the contracts he was trading on his positions to follow along and my calculator just said "Error". This graph gives a pretty good overview on the average volume and I would think it will be even greater this year:
    Balazs and Meathead like this.
  6. Andrei

    Andrei Well-Known Member

    That was the point:)

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