exchange calculated spread ratios?

[Elitist Trader]

Just stumbled upon this.

http://www.cmegroup.com/wrappedpage...InterCommodityRates&h=2&reporttype=marginrate

Anyone else use it?

What exactly do those ratios mean? That I dont have to work out exact DV01 ratios for ted spreads and that I can just use these ratios for spread trading?

 

[rosy2]

i dont use them. it depends on your timeframe and what you're spreading.

 

[Elitist Trader]

what about intraday, first red GE vs first ZT?

 

[nazzdack]

Quote from Elitist Trader:
....red GE vs first ZT?

?....According to that "info", 3 to 2?

 

[Elitist Trader]

Quote from nazzdack:

?....According to that "info", 3 to 2?

Yep, thats what it looks like. really wish they would say how they get those ratios..

 

[nazzdack]

Quote from Elitist Trader:
....how they get those ratios..

I believe it's based on average, relative volatility. The dollar movement on one side of the trade is approximately equal to the dollar movement on the other leg of the trade. Instead of using a 2-to-3 ratio you could use 3-5, 61-100, 31-50, 5-8, 63-100, 16-25, 13-20, 67-100, 17-25, 69-100, 7-10 et al for a more precise hedge based on your own market expectation and still get favorable margin treatment.

 

[rosy2]

here ...
http://www.wolframalpha.com/entities/calculators/minimum_variance_hedge_ratio_calculator/xj/ou/1s/

or do a regression and use the results