“Sniper trading” is a place where I will be educating a select few in day trading the S&P 500 Emini Futures Market.  This is no easy task by industry standards, but that’s where my many years of experience will pay off for those who are on my team.  Most people in the industry will tell you that the people who attempt this will end up paying for the very select few who can actually do it, and I would agree to that statement as well.  This is not easy, but it is possible.  What I am talking about is making money from being a part of a liquidity pool of tens or even hundreds of thousands of people all over the world by writing contracts or agreements of purchases on the S&P 500 futures market.  You agree to sell or buy a group of stock (S&P 500 index) at a set price in that moment of time. 

There are millions of contracts traded in any single day, changing hands from one person or group at a time.  The reason for all of this is to create liquidity for those who want to purchase a kind of insurance policy.  You see, large pension funds, banks, mutual funds (which there are thousands of) have the responsibility of growing the money that people have entrusted to them.  It is their job to increase the assets they have through strategic investing.  The money they handle runs into the billions of dollars.  If a period in time comes (and it always does) when they feel vulnarable to a market drop, they will want to sell their investments to protect their profits, thus doing their job.  But, if they go into the open market and start selling, they will push the market down and others will begin to do the same and a very large sell off could turn into a panic, for no good reason. 

This sell off they are trying to protect themselves from was only a short term drop but now has turned into a crash bringing everyone else down with them because it is also their job to protect the assets of their clients and so on.  The way around this is to sell Futures contracts against the positions that they hold, a kind of insurance policy.  If they are right and the market does go down as they predicted, they can go into the futures market and sell contracts (leveraged agreements) against those positions and make a profit on the decline in value. They are taking a loss on the actual stock that they own, but they are making up for it with the profit in the drop of the futures contract.  They put up a small margin or deposit against the postion, say $3,000 dollars for every $60,000 worth of stock they own.  If the market drops 5% on them and their portfolio drops by that much as well, they made up for it with the profit from the increase in value of the futures contracts they sold. 

Who did they sell it to?  Well, to speculators like me and others.  They sold because they thought the market was going down but I believe it is going up. So, I basically sell the contract to them stating that if the market goes up (against the position they took) they will be losing money to the speculator.  This is the price they are willing to take in order to protect their position from a large drop in the market that they are not willing to accept.  But they may be willing to accept a 1% loss, thus the cost of the insurance.  They can cover their loss or get out at any time.  Their loss becomes the speculators gain. There needs to be someone willing to take the other side of the market at all times to create the liquidity that I was talking about earlier.   This does serve a vital purpose in our economy and it goes on in many other commodities. 

Example:  If a corn farmer has a crop coming to market in 2 months and he needs to get $5.00 per bushel to break even, anything over that will be his profit.  If now at this time he can get $6.00 per bushel, he can make a contract on the futures market for that $6.00 and be assured he will get that price when his corn is ready for the market place, and be assured of a profitable crop return. If, at the time of harvest, his corn is currently selling for $7.00 per bushel he does not get the $7.00 but only the $6.00 he has contracted for. The speculators will make the difference because they assumed the risk.  By the same token, if the corn is only at $4.50 per bushel, the farmer will get the $6 dollars price everyone agreed on when the contract was set.  Now the speculators will be losing to pay the farmer his higher $6 dollar price.  These contracts are done by matching up those who want to buy with those who want to sell. 

Millions of contracts are traded each day on the S&P 500 by those who think they know where the market is going in the next week, day, hour, minute and sub-minute.  I am part of the pool of people who is willing to contract with others all over the world taking the opposite of their positions.  Only one of us is going to be right at that given moment in time.  It is my job to be right more often than not. 

As of late, I have been right about 80-90% of the time.  My position targets for the most part are very small, but highly accurate.  My loss is about equal to my gains but not in all situations.  People will say that you need a 2 or 3-to-1 gain-to-loss ratio to be successful.  That may to true for the style they are trading but not in all cases. 

I have three programs to instantly go to based on market conditions.  Most of the trades are done with the smallest of movements and will take usually less than a minute to complete.  Sounds fast, and it is, but once you see what your part is, you will breathe a little easier. 

Well that is all for now, I need to take a break.  I will continue this topic in future postings.  I will also be posting live charts of these trades so all will know what’s going on.

God Bless you all, until we meet again.

Vince