Andy's Spread Trading Journal

Quote from optioncoach:


I had more trouble with a NQ/ES spread I did on Friday. I shorted the spread at 377.25 by shorting 5NQ and going long 2ES to equate the tick $ value and each point. However for these two this was not entirely correct since the NQ is much more volatile than the ES and I should have found a better ratio. Each .25 tick was worth $25 in the spread. I covered at 374.50 for a nice 2.75 profit intraday and my timing was perfect in hindsight. Since the market reversed, the spread jumped to 390 or so, so my exit was very timely.
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Hi Coach, good to see you trying other strategies and spreading your wings :D Will be following your exploits with interest in this thread as well as your usual ones.

I came across the Schap book as well and he has a chapter on trading index spreads....so that means one can also trade index spreads...yay! :D As Andy does not trade the indexes, a newbie such as me assumed that indexes are not tradable since a pro don't trade them.

Anyway, back to my point which is the calculation of the ratio of selling NQ to buying ES when one thinks a spread looks good between the indexes. This is how he does it which im sure you already know if you have probably reached the chapter on tradinig index spreads

Base on current closing numbers

ES 1429.25 * 50 = 71462.50
NQ 1776 * 20 = 35520.00

Therefore the ratio would be 71462.50/35520.00

= 2.01189

Therefore one would sell 2 NQ for every ES.

In your example you shorted 2.5 NQ for every ES, which wasn't far off. Not trying to be smart but just followed the example in Schap's book to get the ratio and it makes sense.

Have a look at spreading ER2/ES. It looks really good too.

And Coach, what's the code in Interactive Brokers for the BP/Euro spreads you're doing? Are currency spreads good for trading in your opinion? What other spreads are you looking at?



Hi Andy, Thanks for a super thread hope your great track record continues into 2007. I've been following your commodities spreads but cant seem to pull them up in IB. Sure ill work it out soon though :)
 
Andy or Coach,

What do you use visually to decide when to put on a spread. I overlay one index against another in the one IB chart. Its very crude but that's all i use as I don't know of a better way.

For example, i just overlay the NQ chart with the ES chart and if the gap is historically large between them, i short it (hoping for the gap to narrow) and vice versa. In the IB chart, one of the indexes will show up as a candle chart and the other shows up as a simple line chart. I cant seem to get them both to show up as candle charts. Simple as that. Is that correct ?


Thanks
 
Hi Guys,

I will be back around January 8 and happy to answer all your questions.

I am just trying to get away from markets and computers for a few weeks.

I hope you don't mind ;-)

I wish you all a happy 2007...

Andy
 
Quote from J-Law:

Scoobie,

Go to

http://www.manfutures.com/resources/getquotes.cfm?page=cspread

can create spread charts there. Overlay method is difficult to see spread movements.
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Thanks for the link J-Law,

Looks like a good website for looking at the spreads, but i must say I have gotten used to seeing spreads as 2 charts overlapping and looking at the gaps widening and narrowing between them. Just something Im used to i guess. But i'll start looking at the spread chart and start getting used to them instead. Thanks
 
Yeah I saw how Schapp calcalted the spread ratio so I will compare to what I did and see the change in per point value in the spread.

As for the spread itself, Tradestation lets you plot the spread between two securities which allows me to see the chart for each individual item and the spread itself. Not sure if IB has that.

Quote from scoobie27:

Hi Coach, good to see you trying other strategies and spreading your wings :D Will be following your exploits with interest in this thread as well as your usual ones.

I came across the Schap book as well and he has a chapter on trading index spreads....so that means one can also trade index spreads...yay! :D As Andy does not trade the indexes, a newbie such as me assumed that indexes are not tradable since a pro don't trade them.

Anyway, back to my point which is the calculation of the ratio of selling NQ to buying ES when one thinks a spread looks good between the indexes. This is how he does it which im sure you already know if you have probably reached the chapter on tradinig index spreads

Base on current closing numbers

ES 1429.25 * 50 = 71462.50
NQ 1776 * 20 = 35520.00

Therefore the ratio would be 71462.50/35520.00

= 2.01189

Therefore one would sell 2 NQ for every ES.

In your example you shorted 2.5 NQ for every ES, which wasn't far off. Not trying to be smart but just followed the example in Schap's book to get the ratio and it makes sense.

Have a look at spreading ER2/ES. It looks really good too.

And Coach, what's the code in Interactive Brokers for the BP/Euro spreads you're doing? Are currency spreads good for trading in your opinion? What other spreads are you looking at?



Hi Andy, Thanks for a super thread hope your great track record continues into 2007. I've been following your commodities spreads but cant seem to pull them up in IB. Sure ill work it out soon though :)
More...
 
Hi Everyone,

I hope you all had a great time over Christmas and New Year.

Again, all the best for 2007 !

But now, back to business:

I will start trading a $100k account this year. Why $100k? No idea, I just like the number. :) My risk per trade will be 4%. Risk and first target are the same and I will cover 50% of my position at the first target. Then using a trailing stop. I will use $30 for calculating my commission/round turn in open outcry and $15 in elec. markets per spread contract.

I am done with setting up my accounts and some additional work (charts and software, downloading some important data, ... ) and I will start trading next week.

Good trading!

Andy
 
Hi Andy! Do you always enter and exit a spread using a Market On Close (MOC) order?

Most of the time I use a simple MOC order to enter or exit my spreads. The MOC order has the advantage that you have to get filled in the last few minutes of the trading day, and therefore you can check if your fill is in the correct range. Also, volume is best on the open and the close. For my fixed targets I use a spread limit order.
 
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