CME - Why Smart Money Trades Spreads

bone · Jun 9, 2020

Here is the BIG question: will AMP apply that margin at the instant you place that trade during the trading session, or on your daily statement? Those are two entirely different circumstances. The problem for my clients was that AMP (and other discount brokers) didn't have the risk systems of sufficient capability to correctly margin spreads in real time during the trading session.

heispark said:
I contacted AMP and they set $1000 margin for this spread trading (CME margin at this time of writing is $650). My spread trading strategy is very simple so it may not work to everyone. However, if you're already AMP's client, I suggest you contact AMP before you change your broker. They are open minded I think. I will stay with AMP at least for the time being. Cool!

heispark · Jun 9, 2020

bone said:
Here is the BIG question: will AMP apply that margin at the instant you place that trade during the trading session, or on your daily statement? Those are two entirely different circumstances. The problem for my clients was that AMP (and other discount brokers) didn't have the risk systems of sufficient capability to correctly margin spreads in real time during the trading session.

Considering the following feedback from AMP, I guess it's at the instant I place the trade......

bone · Jun 9, 2020

If I could make a suggestion; maybe reply that you require further clarification that the SPAN margin credit would be applied the instant the trade is made.

Don't take that for granted. I speak from experience.

heispark said:
Considering the following feedback from AMP, I guess it's at the instant I place the trade......

heispark · Jun 9, 2020

By the way, /NG spread market is very liquid.... impressive..
(NGN0-NGQ0 / NGN0 / NGQ0)

bone · Jun 9, 2020

heispark said:
By the way, /NG spread market is very liquid.... impressive..

Crude is also. The Butterflies a bit further out in the curve have some real opportunity. The prompt month calendar pairs are essentially delta directional with the flat price.

ironchef · Jun 9, 2020

bone said:
SPAN margin credits

What is that?

Thanks.

bone · Jun 9, 2020

ironchef said:
What is that?

Thanks.

SPAN is the daily futures exchange risk calculation procedure for determining the margin credits for spread positions. In other words, it costs much less to margin an exchange recognized spread as compared to flat price outright contracts. Here is an example:

https://www.cmegroup.com/trading/en...CL&sector=CRUDE+OIL&exchange=NYM&pageNumber=1

ironchef · Jun 9, 2020

bone said:
SPAN is the daily futures exchange risk calculation procedure for determining the margin credits for spread positions. In other words, it costs much less to margin an exchange recognized spread as compared to flat price outright contracts. Here is an example:

https://www.cmegroup.com/trading/en...CL&sector=CRUDE+OIL&exchange=NYM&pageNumber=1

Thank you for the answer.

Have a good day.

heispark · Jun 18, 2020

Overnight · Jun 19, 2020

heispark said:
Considering the following feedback from AMP, I guess it's at the instant I place the trade......

View attachment 230154

AMP does not support exchange-traded spread SPAN margins at this time.

You are on the hook for every leg of your spread, at full exchange margin, 5 minutes before the market close. Once the market re-opens at 6 PM, you are back on daytrade margins. Sorry to burst your bubble.