Future Spread Trading

[Junkou]

ever heard black scholes option value formula or alan greenspan. read this before you get a boner for spreads.
https://en.m.wikipedia.org/wiki/Long-Term_Capital_Management

i think u see who ran this fund. inventors of finance quants. and it blew up!! take look at the trade list...what do u see

The issue that blew up the Long Term Capital Management is the high leverage. They leveraged up to about 50x to make the tiny arbitrage profit bigger. Same as Bear Sterm.

I do agree with you about who can use this strategy. I'm not always long NQ and short YM. You have to know the trend of the spread.

 

[Junkou]

yes I understand what you are asking Juno.. I have the same question but I thought that you also were saying it is futile to trade such a spread...
or even ES/YM ( or it's micro equivalent"
Are you saying that such trading is stupid? not worth it? what exactly are you saying
lets be specific so MNQ/MYM ?

The pair of MNQ/MYM (or NQ/MY) is the best pair to trade. The NASDAQ 100 INDEX and the Dow Jones Index are highly correlated in 99% of the time. Even if you bet on the wrong side, as long as you control your leverage to low number (<4), you will never blow up your account and have the chance to make the bad trades profitable.

 

[tradingismybusiness]

oh boy. here we go again. look i want to say a fee things to you and to the masses.
1. you said trading live. so show your time and sales. since spreading and no one can gun for your stops then it doesnt matter.
2. you are not trading live.
3. you are clueless about spread trading from what you wrote
4. anyone watching this thread please look elsewhere
5. are entering and exiting in your demo/live everyday so you are exiting and licking in a profit or are you just touting daily % moves that are lagging the nq outright. you are spread holding not trading. now when your spread blows out which will be very soon you will say. oh i sold out of it and locked in blank. which will be a lie.

i have traded everything under the sun for years and i will tell you the answers to the questions i posed to you. the correct answers that is so that others are not ruined because of your misinformation and your lies.

 

[tradingismybusiness]

1.the biggest risk in spread trading is getting hung!! anyone who spread trades will tell you getting hung is the biggest risk. now go google it. liar.
2. the biggest expense in spread trading you liar is slippage way more than outright trading now think about why this is?? you are always going to be paying up to get your fill on one of the sides so slippage n fees will always be more than a good outright trader.
3. the dow has 30 stocks and good luck during earnings with your spread
4. spread trading has its benefits and drawbacks but in no way or from are you hedged with what you are doing even with your ratios.
5. its ok to say hey im experimenting with this spread you guys if u want to watch but dont go telling people they cant blow out or the only risk is leverage because thats the biggest load of crapola i ever heard in trading.

I wish you luck and good fortune but dude keep it real ok and jealous of someone who doesnt know much about spread trading. absolutely not

 

[traderjo]

tradingmybusiness..
Can we stick to the specific spread of NQ/YM ...rather than all this general theory and LTCM etc
and please you don't have to be so angry..
so in a nutshell are you saying that the NQ/YM spread that Junkou is mentioning has and can go so much out of whack that one can blow his/ her account...
- when did it happen?
- Do you then claim that it's co-relationship does not matter ?
- Slippage: if both legs are filled at market and this is not a scalping trade then and if the spread moves sufficiently then giving away few ticks what does it matter
- "no way or from are you hedged with what you are doing even with your ratios"
How? if it is a dollar neutral.. is it because of the mix of the underlying Dow has 30 stocks and NQ has 100? is that the reason and the 1-2 YM stocks will affect the 30 index more strongly than 1-2 stokcs in NQ is that the theory?

I understand your point and it would have been hugely relevant if somebody was claiming that a retail can spread trade something like a arb of 1SP / 5ES which perhaps only high co lo firms can do.. but this NQ/YM spread is talked by other's too...
SO I don't understand why are you so strongly putting down this idea?

Now to be fair then Junku if you could also enlighten on
- Do you actually trade this spread with real money? and how long?
- How do you execute the 2 legs?
- What is the worst loss in $ you have suffered and what is the max profit

 

[tradingismybusiness]

1. im not even close to angry.
2. if this is anger to you dont even think about trading live its a tuff game more like rugby than mathematical word problems. you sound like the kid we will shake down for his lunch money and you will puke out of your trade with a lil BOO. this isnt my thread. im just correcting some serious wrongs and trying to save your ass from guys like me with money who enjoy taking it from other traders.
your welcome

 

[traderjo]

mate correct all you can with some examples and direct answers.. just calling names won't mean anything ..
repeating
so in a nutshell are you saying that the NQ/YM spread that Junkou is mentioning has and can go so much out of whack that one can blow his/ her account...
- when did it happen?
- Do you then claim that it's co-relationship does not matter ?
- Slippage: if both legs are filled at market and this is not a scalping trade then and if the spread moves sufficiently then giving away few ticks what does it matter
- "no way or from are you hedged with what you are doing even with your ratios"
How? if it is a dollar neutral.. is it because of the mix of the underlying Dow has 30 stocks and NQ has 100? is that the reason and the 1-2 YM stocks will affect the 30 index more strongly than 1-2 stokcs in NQ is that the theory?

 

[hrokling]

every major loss you read about in the paper that needs a bailout is a spread blowout
google ltcm long term capital management or amaranth or vic neiderhoffer there are hundreds

Spread trades... without stop loss, and concentrating capital into one correlated strategy/trade. The examples did not adhere to proper risk management.

 

[Junkou]

No positions change for Wednesday, May 6.

Today MNQ up 1.44%, M2K up 0.85%
MYM up 0.72%

Portfolio's gain=2x(1.44%x0.5+0.85%x0.5-0.72%)=0.85%
safe profit (actually the gain was much more right after the market open)

 

[Junkou]

Monday, May 4:

MNQ up 1% while MYM down 0.1%. The portfolio made 2x(1%+0.1%)=2.2%. Jealous? haha

Positions for Tuesday, May 5:

Long: 50% in MNQ, 50% in M2K
Short: 100% in MYM

Even though market trend is not necessary, I would like to say that:
Market is very likely to go up tomorrow, May 5, 2020.

very likely has been verified. haha