Futures Spread Trading
- Thread starter cml2949
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With the ES/YM spread... YM was having more of a pronounced move compared with the ES.. Since the ym was rallying a lot harder the spread was difficult to do.. I'm not sure how you would adjust the ratio?!??! , but I would maybe add a scalp to the trade or like you said not trade or just close out the position..
Hey SethArb nice to hear from you.. Are you still doing the metals spreads? If so are you doing them through CBOT or CME's Globex?
Hey SethArb nice to hear from you.. Are you still doing the metals spreads? If so are you doing them through CBOT or CME's Globex?
The two move in tandem a lot but the spread can move over 100 pips in a few days on large swings or 500 - 600 pips over a few months (spreads can be held for long periods of time as long as the spread trend is in place).
I do 2 BP for every 1 EC. Both futures have significant volume and the b/a spread on each is normally 1 pip. Every 2BP:1EC spread is 12.50 a pip.
So a 4:2 would be $25 a pip, etc...
I put one on last week for about 100 pips in 3 days. The spread trends a lot better than the actual underlying currencies. Best way to do this is to look at a daily chart of both and plot the spread between the BP-Euro and look at a year chart to see the trends...
I do 2 BP for every 1 EC. Both futures have significant volume and the b/a spread on each is normally 1 pip. Every 2BP:1EC spread is 12.50 a pip.
So a 4:2 would be $25 a pip, etc...
I put one on last week for about 100 pips in 3 days. The spread trends a lot better than the actual underlying currencies. Best way to do this is to look at a daily chart of both and plot the spread between the BP-Euro and look at a year chart to see the trends...
Have you noticed when your doing the spread that one currency rallies more than the other? Like the other topic on this thread, what do you do with the spread that is going against you with one that has a more pronounced move to the other ??!?
Assuming the front month is March, using the settlements of Friday, is the spread currently at 637.3 by initiating in the BP leg and balancing in the EC leg?
Very interested to watch both during this coming week..
Assuming the front month is March, using the settlements of Friday, is the spread currently at 637.3 by initiating in the BP leg and balancing in the EC leg?
Very interested to watch both during this coming week..
Witrh the pound crashing and the Euro falling only somewhat based on the spread I shorted the spread at 6341.
In other words I sold Pound futures at 1.9480 and went long Euro futures at 1.3139 with 2x as many Pound futures as Euro. I always keep the 2:1 ratio to balance out the pip values.
I could have just shorted the Pound alone but the spread reduces the volatility of the position for me to hold for longer periods of time. For example, the spread is already down to .6333 (8 pips) even though the Pound is down a lot more but it is a trade-off. If the Pound reversed hard on me and the Euro did as well, then I would not lose much as long as the spread stayed somewhat constant. So I get less reward for reducing my risk/volatility somewhat.
I find the Pound the more volatile of the two and therefore enter the spread based on my Pound expectation and use the Euro to hedge somewhat. I also think that based on reviews of the charts, the Pound tends to lead the Euro a little more often than not. So since I want to short the Pound I use the long Euro to hedge and I will want to hold this as long as I can.
EDIT: For example, Pound futures are down 83 pips while Euro futures are down 24 pips. This is how the spread widens.
In other words I sold Pound futures at 1.9480 and went long Euro futures at 1.3139 with 2x as many Pound futures as Euro. I always keep the 2:1 ratio to balance out the pip values.
I could have just shorted the Pound alone but the spread reduces the volatility of the position for me to hold for longer periods of time. For example, the spread is already down to .6333 (8 pips) even though the Pound is down a lot more but it is a trade-off. If the Pound reversed hard on me and the Euro did as well, then I would not lose much as long as the spread stayed somewhat constant. So I get less reward for reducing my risk/volatility somewhat.
I find the Pound the more volatile of the two and therefore enter the spread based on my Pound expectation and use the Euro to hedge somewhat. I also think that based on reviews of the charts, the Pound tends to lead the Euro a little more often than not. So since I want to short the Pound I use the long Euro to hedge and I will want to hold this as long as I can.
EDIT: For example, Pound futures are down 83 pips while Euro futures are down 24 pips. This is how the spread widens.
i suppose you already know that the ⬠against the pound is traded actively directly already instead of in a spread? i wouldn't really call it a spread trade.
I am trading the Pound/$ v. the Euro/$ spread so in that sense it is a spread trade. I am not talking about the Euro/Pound pair.
The euro/Pound is not a spread it is a currency pair.
The Euro/$ and Pound/$ is a spread between the two.
A spread does not make a directional bet on the underlying currencies, it makes a directional bet on the spread between the two. If I am long the Pound and short the Euro, I make money if:
1) Both go up but the BP moves up by a larger amount
2) BP goes up and Euro goes down
3) Both go down but Euro falls faster.
IN all 3 circumstances the spread widens and that is what I am trading, not specifically the direction of the individual currencies although that is a factor.
If you buy the Euro/Pound, you are making a directional bet on the Euro v. Pound and you only make money if you are right on the direction of the Euro against the Pound.
The difference is subtle but significant. A spread is distinct from a currency pair. It can be confusing because a currency pair is long one side and short the other but it is not a spread in the normal use of the word. A spread trade in futures is a trade based on the difference between two futures such as the Pound and the Euro.
The Pound/Euro is not a position based on the difference between the two but the value of one in terms of the other.
The Euro/$ and Pound/$ is a spread between the two.
A spread does not make a directional bet on the underlying currencies, it makes a directional bet on the spread between the two. If I am long the Pound and short the Euro, I make money if:
1) Both go up but the BP moves up by a larger amount
2) BP goes up and Euro goes down
3) Both go down but Euro falls faster.
IN all 3 circumstances the spread widens and that is what I am trading, not specifically the direction of the individual currencies although that is a factor.
If you buy the Euro/Pound, you are making a directional bet on the Euro v. Pound and you only make money if you are right on the direction of the Euro against the Pound.
The difference is subtle but significant. A spread is distinct from a currency pair. It can be confusing because a currency pair is long one side and short the other but it is not a spread in the normal use of the word. A spread trade in futures is a trade based on the difference between two futures such as the Pound and the Euro.
The Pound/Euro is not a position based on the difference between the two but the value of one in terms of the other.