Futures Spread Trading chart profit/loss calculation

[Con1991]

I'm still learning about futures trading and in particular spread trading. What has me confused for awhile now is this...When you see a chart (attached) of a futures spread go from + to -, does this 'add up'?

In other words, I have a Silver spread trade between Sep 21 and Dec 21(SIU21-SIZ21) open for example, and it if goes from the 0.250 to -1.250 on the chart, does that equal more or less in profit/loss? I'm wondering if that counts as +1.500, $7,500 in profit? It is one aspect of spread trading that is not quite clear.

Thanks for any input

 

[abc1234]

I'm not sure about the accuracy of that chart. I'm guessing you are charting two outrights against each other and there is a lot of stale data.

Here is SI Sep21-Dec21 implied calendar from TT. At $5.00 per tick the most you could have pulled out of this on a swing trade is $300 per contract if you buy -0.120 and sell -0.060.

 

[Overnight]

@bone ALERT!

 

[MichalTr]

I'm still learning about futures trading and in particular spread trading. What has me confused for awhile now is this...When you see a chart (attached) of a futures spread go from + to -, does this 'add up'?

In other words, I have a Silver spread trade between Sep 21 and Dec 21(SIU21-SIZ21) open for example, and it if goes from the 0.250 to -1.250 on the chart, does that equal more or less in profit/loss? I'm wondering if that counts as +1.500, $7,500 in profit? It is one aspect of spread trading that is not quite clear.

Thanks for any input

Hello !

Answering your questions:

1. yes, it's normal that calendar spread price can be both: negative or positive (as that part of curve can be in contango or backwardation)

2. on your chart - no, it doesn't mean that it is accurate profit/loss. When you chart spreads using outright data (as in your example) and you use last to last instead of bid to bid (or ask to ask or (bid+ask)/2 to (bid+ask)/2) you see false view with a lot of non existing opportunities. You need to chart exchange traded spread (like in post above) or outright based spread but using bid or ask data (or both), not last trade data.

Little addition to consider, maybe it will help:

1. Silver Dec21 contract has not so much volume traded today (less than 100) and Sep21 is not much better. I don't know how the exchange traded spread ladder looks like (if there is liquidity) but using outrights can be costly in term of bid/ask spread and you should be sure how your margin is calculated. I think it can be better idea to use exchange traded spread in this situation. If you really want to trade those months.

2. Do you have any outlook at how that spread can behave in short/long future ? Or you just wanted to catch those non existing spikes on chart ?

 

[shawnaboyd]

The price can be either negative or positive and it is quite a normal thing to happen so don’t worry about it. You can make use of the bid or ask data or maybe even consider both.