CORRELATION EminiS&P-Russel2000

Quote from profutrader:

:) Thanks for tip.

Since you are already trading and guiding guys in your prop firm, what is view on expensive charting software (eg CQG) and TT platform. Worth every penny? I am asking because there is a prop offering this kind of setup but cost quite a bit. Frankly, I do not know whether I can cover the cost as easily as I did in the pit. My last question.
:D

Maybe I could join your prop firm.:D :D
Or do you want set up a prop firm here? A possibility?
:p
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I use TT and CQG. By far, CQG has the highest quality data feed and customer service. The price is well worth it. X-Trader is the only program I have trusted so far. There are other packages which cater to the retail market that are good as well. However, most direct clearing futures firms only support TT. It is very stable with good risk management. This is important for a prop situation.

Your desk fee for using TT, CQG, rent and a news feed should not exceed $2,000 per month. You should have a say in what you want to have enabled. This come out to about $100 per day to cover your fixed costs. You should be able to cover that after a few months of trading.

No, I am not considering new traders for my group. I already have commitments starting August. I don't intend to expand the group, since I just moved from Chicago and am working on getting this new area up and running.

Good luck and happy trading.
 
Quote from FuturesTrader71:

I use TT and CQG. By far, CQG has the highest quality data feed and customer service. The price is well worth it. X-Trader is the only program I have trusted so far. There are other packages which cater to the retail market that are good as well. However, most direct clearing futures firms only support TT. It is very stable with good risk management. This is important for a prop situation.

Your desk fee for using TT, CQG, rent and a news feed should not exceed $2,000 per month. You should have a say in what you want to have enabled. This come out to about $100 per day to cover your fixed costs. You should be able to cover that after a few months of trading.

No, I am not considering new traders for my group. I already have commitments starting August. I don't intend to expand the group, since I just moved from Chicago and am working on getting this new area up and running.

Good luck and happy trading.
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:) Thanks for revealing so much. For me, the pieces are coming together. A couple of months more, I should trading like I always do in the pit. Albeit much smaller but happier. :D

Pit politics in the last days are getting really bad. :mad: A lot of angry traders.

Have a good day FT71. God bless.
 
I went long ER2 vs. short ES Friday (yesterday) afternoon in 3 tranches:
613 vs. 1187.25
612.80 vs. 1187.50
611 vs. 1183.50

I'm looking for a good 50bp outperformance by ER2 over ES Monday. Anyone here have this trade on?

I have equal # contracts on both sides -- so I would expect it to behave as a net long position on top of the spread given the higher contract size and higher vol of ER2. If the market continues to slide Monday, I will sell some ES to equalize the total $ exposure on the legs.

My indicators say go long ER2 vs ES and even vs. the beat-up NQ. Haven't put on the ER2/NQ trade though.

For the spread/pairs traders out there..
what other correlated pairs are tradable in the futures markets (electronic markets only) besides these equity index futures?

Thanks and good luck.
 
Quote from lynx2004:

[...]

I have equal # contracts on both sides -- so I would expect it to behave as a net long position on top of the spread given the higher contract size and higher vol of ER2. If the market continues to slide Monday, I will sell some ES to equalize the total $ exposure on the legs.

[....]
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The spreads I have indicate that you need approx. 0.8 ER2's per ES. What makes you believe that an evenly weighted spread will yield a good result?

Also, how do you know how far off the spread is whether or not you will realize a loss on both sides (spread could be expanding)?
 
I've attached a picture with two different weekly spread charts -- closing prices only, so the highs and lows of the spread are missing.

You are right to consider adding another ES to your 1:1 pair and keep some of the directional bias balanced.

The top chart in the pic shows a 3:2 ratio. (This is based on a daily volatility adjusted balancing. The 0.67 that I'm suggesting is essentially the same -- unless you are doing tens of contracts -- as the 0.8 suggested by FuturesTrader71.)

In both cases, I can see us approaching a closing low, but looking back a few years suggests that there could be more of a decline in store.
 

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Hallo spread traders,

take a look at the ER2 / EMD Spread - 1:1 Ratio is good i think.
Hottest thing in town fore me ....

Coments wellcome
Have a good relaxed weeken; have fun
Mulder
 
Quote from DaveN:

I've attached a picture with two different weekly spread charts -- closing prices only, so the highs and lows of the spread are missing.

You are right to consider adding another ES to your 1:1 pair and keep some of the directional bias balanced.

The top chart in the pic shows a 3:2 ratio. (This is based on a daily volatility adjusted balancing. The 0.67 that I'm suggesting is essentially the same -- unless you are doing tens of contracts -- as the 0.8 suggested by FuturesTrader71.)

In both cases, I can see us approaching a closing low, but looking back a few years suggests that there could be more of a decline in store.
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Dave, those are interesting comments. I'm trying to generate a chart showing the intraday spread as well as interday to see what it looks like. Maybe someone can decrypt it for me. I'm not much on spreads, but I do know the basics. The guy who really knows about spreads is H2O. He pointed me in the right direction.

My spread ratios are based on Historical Volatility in percent for the last 20 trading days. The current spread for ES/ER2 is 0.78 ES for every ER2. The chart attached here will say 782.8 for the interday spread ratio. You have to remember to divide this by 1000 to get the right number.
 

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I use something very similar to historical volatility in my calculations. HV uses close-to-close deviations, which works pretty well. I prefer to incorporate deviations that consider the high and low of the bars as well. Either one works fine, with only small differences, and the relative results are consistent.

I've attached a .gif with several charts of the 60 minute spread. (I can take this down to 1 minute increments, but I chose 60 to cover some history in the chart as well.)

You can see the different results depending on what ratio you might choose. For some ratios, this might be a good entry, and for others, not so good. The final chart on the .gif in magenta is a hypothetical, continuously adjusted ratio. That is, for the chart interval, 60 minutes, a volatility adjusted price ratio is calculated and contracts are added or subtracted accordingly. This would approach reality if you had larger positions. e.g. if the ratio would change from 1.42 to 1.46 in a sixty minute period, then this would be tradeable if you were able to have a 100 contract base, and add 4 more ES contracts to keep the spread in balance.

The point of my post is to demonstrate the variability and "art" that goes into trading spreads. Besides what you might see as a chart supt/rest level, one trader's definitive entry point may not be another's depending on how the spread is built.

There's more information in this comparison for anyone that wants to work with it a bit. Consider that the 1:1 ratio chart is showing a clear down move, while the 2:3 and 1:2 ratio charts have a small bounce in them. This is where some of the "art" and the feel comes into trading a spread. I know several excellent spread traders who use different ratios but can all make money in the same move. The judicious adding or subtracting of contracts does seem to be able to change the shape of that line. I think that this is the direction for lynx2004's comment earlier in the thread.
 

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I wanted to make a comment about the inter-commodity spreads and how the SPAN margining might drive certain ratios in practice. On the CME website the 1:1 ER2:ES ratio is listed at 88%.

http://www.cme.com/html.wrap/wrappedpages/clearing/pbrates/PBISInterEQ.htm

Unfortunately, I don't know what that means. Is it 88% of the original margin for each, 88% discount, etc? 5 ES: 1 SP was listed at 100% which has me further confused. If anyone could provide insight, I'd appreciate it.
 
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