Great comments again. I think it is telling you that you will require 88% of full margin for each product. Remember that when spreads are going wrong, you lose on both legs of the spread.
CORRELATION EminiS&P-Russel2000
- Thread starter NickBarings
- Start date
well...
now it is obvious that my entry to go long er2 vs. es was a little(?) premature. I sold some ES this AM (Monday) to adjust my long bias..have to admit this AM (Monday) it wasn't pretty (short leg moving up and long leg moving down)...I took the opportunity to sell some as the spread improved in the afternoon but I bought them back in again towards the close. My trade is still underwater by close to 30bp (about 1.80 er points). I am again close to 1:1 (0.95er vs. 1.0es). I am keeping the high ratio as I expect er2 to snap back here as it did in the Jan sell-off and in the Feb sell-off. During both of those instances, er2 underperformed es to the same extent as it did now before it rallied. Of course, I am trying to pick a bottom of the spread here but it could be still expanding and I could be very wrong.
PS: I have still to learn a lot about spread trading. Thanks for the posts in this thread (there have been many informative posts).
Good trading!
Miss Market gave me a break yesterday afternoon to get out of a bad trade profitably (a lot profitable because I plowed in to buy more spreads at the lows yesterday--it turned out to be the lows for the spread..if only I had not bought above 2 days earlier)..
I still believe the spread is close to an interim bottom (or was it already made yesterday?) but I need to do more research before commiting serious capital (last few days were painful). As DaveN pointed out, a form of dynamic rebalancing strategy with a sort of vol adjustment to size up the legs (based on ATR, hist vol, implied vol? I don't know which would work best??) might be the way to go.
PS: It felt great getting out completely yesterday afternoon..sold a bunch of ER2 all the way from 614.60-615.30 while buying ES 1189.50-1191.50.
I still believe the spread is close to an interim bottom (or was it already made yesterday?) but I need to do more research before commiting serious capital (last few days were painful). As DaveN pointed out, a form of dynamic rebalancing strategy with a sort of vol adjustment to size up the legs (based on ATR, hist vol, implied vol? I don't know which would work best??) might be the way to go.
PS: It felt great getting out completely yesterday afternoon..sold a bunch of ER2 all the way from 614.60-615.30 while buying ES 1189.50-1191.50.
What charting package do you use? You should chart the spread itself with a dynamic ratio and get live feedback on whether the spread is expanding or contracting. I wouldn't trade a spread without it.
FT71,
you are correct. I have to do a lot more work before trading the spread. At times it can behave worse than an outright position.
I see SP500 Index 200dma at 1153.5 -- most probably hit tomorrow -- should watch out.
Russell2000 - 200dma 596.9 was broken and closed below today...
Are we in for some rough action tomorrow?
Will someone take a few seconds to explain why it is important to take in account historical volatility when calculating spread ratios. It would really help me out.
Thanks
Thanks
==
Will take your word on the VW-Porshe, Profitlogic and ;
4 wheels are more stable than 2,
even if i use mostly 2 wheel drive on 4 wheels.