Calculating spreads

M

maninjapan

Im looking to put together my own spread charts and was wondering if there was a general rule for weighting contracts with different tick/point values.
Ive read somewhere about equity spreads, (times the price by the point value to give you a total cash value) but was wondering if there were anyother generally accepted ways.

Also is there a set way to determine the ratio of contracts for a spread? I know a lot of spreads have an 'official' ratio (if you could call it that) but once again, is there another way?
 
Quote from maninjapan:

Im looking to put together my own spread charts and was wondering if there was a general rule for weighting contracts with different tick/point values.
Ive read somewhere about equity spreads, (times the price by the point value to give you a total cash value) but was wondering if there were anyother generally accepted ways.

Also is there a set way to determine the ratio of contracts for a spread? I know a lot of spreads have an 'official' ratio (if you could call it that) but once again, is there another way?
More...
Spread charts?
Futuresource.com

Ratios?
Almost always 1:1, except on crude crack spreads, and cattle/feeding costs spreads.
 
Quote from maninjapan:

Im looking to put together my own spread charts and was wondering if there was a general rule for weighting contracts with different tick/point values.
Ive read somewhere about equity spreads, (times the price by the point value to give you a total cash value) but was wondering if there were anyother generally accepted ways.

Also is there a set way to determine the ratio of contracts for a spread? I know a lot of spreads have an 'official' ratio (if you could call it that) but once again, is there another way?
More...

There's no general rule for weighting contracts with different tick/point values,but to be honest a 1:1 ratio would be a good starting point.

Are you planning on actually trading any spreads or just charting them?Also let us know which contracts you are specifically looking to spread without all the mystery and someone here may have the information you're looking for.

If you want to stray from any 'official' spread ratios then unfortunately the only real way to learn which ratios work for whatever strategy you are employing is to put the trades on and you'll soon find out if you are under/overweighted in one of the contracts and can adjust accordingly.
 
Be careful in calculating your spreads. Most vendors only supply spread charts based on the last trade price or each underlying leg. This is very misleading and can lead to lead to bad price swings. Generate your spreads off bid or ask of each leg for a more accurate reflection of the true market.
 
Stay focused on spreads that trade at the same exchange or platform, i.e. CME Hogs vs CME Cattle, CBOT Corn vs CBOT Wheat. Be careful with different exchanges, i.e. CBOT Wheat vs MGE Wheat, CBOT Soybean Oil vs WCE Canola Oil.
 
I agree with Nazz although I think you are probably going to be okay if you do a KC/Chi spread or a KC/Minn spread.or Chi/Minn Spread on the wheat. Seasonal markets defintitely. Also Nazz have you ever traded canola? I never have I wonder what it's like
 
You must log in or register to reply here.
Back
Top