Double Butterfly spread

Wingz said:
To follow on from the 'paper seller' I saw in DecJan previously. I got short that spread today right before settlement expecting trading on the bids and anticipating a tick or two. However, it was like a western movie with dust clouds brushing along the horizon, he was nowhere to be seen. I quickly hedged with the 6 month DecJun and put in my bid to scratch in the DecJan with priority. Managed to get the DecJan back and make 2 ticks on the DecJun, so got out with a 1/6ish of a tick loss net overall.

However given that information I went long the 3 month fly DecMarJun which was at range lows. The settlement seller wasn't there so the DecMar area was not going to be supressed, it was at lows in a range so a long over settlement made sense as a high probability trade into the afternoon session.

For me these kinds of observations provide the most edge in my own trading with the spreads. However as bone pointed out the backs are really the most exciting part of the curve, there's a whole lot less competition and free trades being handed out left and right for a market maker.
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Give us an example defining back month
 
cdcaveman said:
Give us an example defining back month
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In my head, back months are usually 8-10 months away from the front month in Brent. Although I'm sure others have a different definition. The trading personality of the spreads changes the further you move down the curve (in time).
 
Wingz said:
In my head, back months are usually 8-10 months away from the front month in Brent. Although I'm sure others have a different definition. The trading personality of the spreads changes the further you move down the curve (in time).
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Maybe something along the lines of a Dec17-Mar18-Jun18 Fly or a Sep18-Oct18-Nov18-Dec18 Condor are good examples of spread combinations a bit farther out in the curve. "back months" if you will. You can really get BACK in the the Eurodollars !
 
BTW, I have clients making very good livings trading "further back" in the energy curve than I've suggested above. Just 'sayin. It's certainly the road less traveled and the OI is almost all Commercial.
 
cdcaveman said:
Past a certain threshold margin goes through the roof...
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That's not true. All things being equal ( duration between intracommodity legs) STIRS are the only intracommodity spread that I am aware of where the months farther out on the curve margin more than the prompt months.

The exchange has an algorithm it's used for years to determine fair settlement value for less liquid expiries.
 
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