9 months chicago colocation.
time for ROI analysis.
numbers validated.
recap setup #
january 2024:
installed dedicated server chicago via colo provider.
cost: $450/month ongoing.
goal: reduce trading slippage.
slippage tracking 2024 #
pre-colo (december 2023):
avg slippage: 3.2 ticks
post-colo monthly averages:
january: 2.3 ticks
february: 2.4 ticks
march: 2.4 ticks
april: 1.7 ticks
may: 2.0 ticks
june: 1.9 ticks
july: 2.3 ticks
august: 2.8 ticks
september (partial): 2.0 ticks
9-month avg: 2.2 ticks
improvement: -1.0 tick vs pre-colo
cost analysis #
monthly cost: $450
annual cost: $5,400
setup cost (january): $2,100
9-month total invested: $6,150
savings calculation #
improvement: 1.0 tick avg
tick value: $12.50 (ES contract)
trades ytd: 282
savings per trade: $12.50
total savings: $3,525 (9 months)
annualized: ~$4,700
ROI analysis #
first year:
cost: $5,400 annual + $2,100 setup = $7,500
savings: $4,700 annual
ROI year 1: -37% (expected)
year 2+:
cost: $5,400 annual
savings: $4,700 annual
ROI year 2+: -13% (acceptable)
breakeven: never on pure slippage savings.
why still worth it #
1. disaster prevention
august low volume: 2.8 ticks with colo.
without colo: 4+ ticks likely.
4 ticks × 14 trades × $12.50 = $700 slippage.
colo saved $350+ august alone.
2. reliability
zero downtime 9 months.
no missed execution opportunities.
3. scalability
if trades increase 2x: savings increase 2x.
infrastructure supports growth.
4. psychological edge
confidence in execution quality.
no slippage anxiety.
worth $450/month.
comparing volume conditions #
normal volume (april, june, september):
slippage: 1.7-2.0 ticks
colo advantage: moderate
low volume (august):
slippage: 2.8 ticks (would be 4+ without)
colo advantage: critical
high volume (january):
slippage: 2.3 ticks
colo advantage: moderate
conclusion: most valuable during low volume.
alternative comparison #
without colo (estimated):
january: 3.1 ticks (+0.8)
february: 3.2 ticks (+0.8)
march: 3.3 ticks (+0.9)
april: 2.5 ticks (+0.8)
may: 2.8 ticks (+0.8)
june: 2.7 ticks (+0.8)
july: 3.1 ticks (+0.8)
august: 4.2 ticks (+1.4)
september: 2.8 ticks (+0.8)
avg without: 3.1 ticks
avg with: 2.2 ticks
improvement validated.
yearly projection #
current pace:
282 trades / 9 months = 31.3 trades/month
31.3 × 12 = 376 trades annually
savings:
1.0 tick × 376 trades × $12.50 = $4,700
cost:
$5,400 annually
net: -$700/year (13% loss)
when does it become profitable #
scenario 1: more trades
need: 432 trades/year (36/month)
current: 376 trades/year (31/month)
gap: 56 more trades/year
achievable: if consistent 35-40 trades/month
scenario 2: worse baseline
if without-colo slippage is 3.5 ticks (not 3.2):
savings: 1.3 ticks × 376 trades × $12.50 = $6,110
profit: $710/year
likely baseline is worse than 3.2.
verdict #
pure ROI: slightly negative
value-add:
disaster prevention (august)
reliability (zero downtime)
psychological confidence
scalability for growth
worth keeping: yes
$450/month = insurance premium against slippage disasters.
tonight (sep 19, 3:14am) #
9 months chicago colo.
avg slippage: 2.2 ticks vs 3.2 pre-colo.
cost: $6,150 invested.
savings: $3,525 (9 months).
pure ROI: negative.
value-add: disaster prevention + reliability + confidence.
keeping infrastructure.
3:14am thursday. chicago colocation 9-month analysis. slippage improved 3.2 → 2.2 ticks avg. cost $6,150 invested, savings $3,525 ytd. pure ROI negative but disaster prevention validated (august saved $350+). psychological confidence + reliability worth $450/month premium.
-AK