Futures spread trading

Quote from bone:

Better cointegration characteristics and something more reliable than a pure divergence play.
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Ahhhh... It all falls into place now.

I was actually on the cointegration train during the time I messaged you just recently. Still chipping away at it though, nothing much I could really ask you about haha.

Using MATLAB. Hopefully it will turn into something useful
 
Quote from murphmack:

Ahhhh... It all falls into place now.

I was actually on the cointegration train during the time I messaged you just recently. Still chipping away at it though, nothing much I could really ask you about haha.

Using MATLAB. Hopefully it will turn into something useful
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Honestly, I don't consider them 'spreads' - from a risk standpoint, you are better off just trading the outright IMO. They are just pure divergence plays. For example, the calendar spreads have been so good with the grains that honestly I have seen no reason to get involved in that nonsense of beans vs. corn. Ditto for WTI vs. Brent as well. There are plenty of smoother and better 'behaved' (in terms of modeling) spreads out there. Lots.
 
Quote from bone:

Honestly, I don't consider them 'spreads' - from a risk standpoint, you are better off just trading the outright IMO. They are just pure divergence plays. For example, the calendar spreads have been so good with the grains that honestly I have seen no reason to get involved in that nonsense of beans vs. corn. Ditto for WTI vs. Brent as well. There are plenty of smoother and better 'behaved' (in terms of modeling) spreads out there. Lots.
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Well, Brent / WTI Was a spread until it wasn't. Know what I'm sayin? I'm not trying to refute what you are saying because I know exactly what you mean. But it was doing alright for a little while (pre May) in terms of that risk standpoint. Am i wrong?

I guess it loses a lot of credibility as a spread if it will trade 99% and then experience such a divergence like that with no reversion seemingly for the last 2.5 months.
 
Quote from murphmack:

I guess it loses a lot of credibility as a spread if it will trade 99% and then experience such a divergence like that with no reversion seemingly for the last 2.5 months.
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You are essentially just reinforcing my point I believe - no arguement intended really.
 
Quote from bone:

You are essentially just reinforcing my point I believe - no arguement intended really.
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True.

Did you catch the zero hedge article about it?

I can't link cause my copy and paste isn't working :mad:
 
I mean, from semantics standpoint the Bund vs. the Ten Year Note is a spread trade.

Except that upon closer inspection, the two year correlation is about 65% - and the cointegration characteristics and divergence traits suck bigtime.
 
Quote from bone:

As an example, I bought the U1-Z1 Heating Oil Calendar Spread last Wednesday morning on July 13 and it is marking up nicely but we are still a fair bit away from the target levels.
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I am out of this, we bought March 12 - July 12 Wheat on Monday.

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In terms of the previous post, I was referring to my original post on page 19 of this thread, 07-21-11 10:36 AM

Quote from bone:

Looking at my statements for this year, I can see that my average holding timeframe for Eurodollar Calendar Spreads (Z1-Z2 particularly) was 14 trading days.

A Nymex or ICE crack spread might be 30 minutes up to three hours. As of this morning, the August RBOB Crack had a 202 tic average twenty day trading range and a twenty day hisorical volatility of 93 %. Obviously you want to trade that beast differently than a Eurodollar Calendar that has a seven tic daily trading range.

For me, at least, the volatility and trading range of the particular spread determines the holding period. We set profit targets and stop-loss levels at the time of entry.

As an example, I bought the U1-Z1 Heating Oil Calendar Spread last Wednesday morning on July 13 and it is marking up nicely but we are still a fair bit away from the target levels.
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Starting from square one, I'm looking for good introductory information to get up to speed on spreading. This is the stuff that is taken for granted by people who have been active in this area for years. Above all, I'm looking for dense information (lists) more than strategy ideas or verbose essays.

I'm curious about the actual mechanics of it: a list of the exchange recognized inter-commodity spreads (and their recognized/margined ratios), which ones have electronically quoted implied prices and which need to be legged, etc. Maybe a brief intro to fundamentally-meaningful yield curve or ag spreads?

I have some ideas for strategies, but have had trouble coming up with answers to these basic questions so I can figure out how much I still need to learn before it makes sense to start testing ideas. I would appreciate it if anyone could provide links with this sort of information. Thanks!
 
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