“I’ve seen excitement, and I’ve seen boredom. And boredom was best.”
― Terry Pratchett, The Color of Magic
― Terry Pratchett, The Color of Magic
How do you approach trading spreads like this?
- Thread starter Adam777
- Start date
Are there any books or papers that show how to trade the rollover?
Still one more benefit to staying away from the prompt month calendar roll and gravitating more towards intramarket Spread combinations out in the curve. Calendar pair spreads comprising the first three months generally speaking seem to behave in a VERY delta directional manner as compared to the flat price front month - so much so that I advise my clients that they are essentially trading a mini flat price contract from a risk perspective. For many commodities you can virtually overlay the price curves in fact.
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Nice quote but it completely misses the point I was trying to convey. Having a limited sphere of trade choices makes for riskier entries. Forcing trades loses capital. Boredom doesn't equate to improved trading performance in the sense of limiting yourself to maybe nine prompt month calendar pair roll combinations versus hundreds of intramarket spread combinations for the same futures name when considering serial monthly expiries.
I've seen it for an extended period of time with a couple hundred clients - Having a wider portfolio of opportunities enhances selectivity and that directly correlates to improved trading performance when it comes to spread trading.
I have a lot of experience trading energy spreads. I will tell you this, you are opening a big can of worms, in that game execution and liquidity are everything. New guys want to scalp or day trade, the bigger more durable players swing trade outrights or in some cases spreads. There is no low hanging fruit all the easy edges are gone. I suggest swing trading liquid instruments. Of course most don't want to because risking 0.5% of their account twice a week isn't a meaningful return and so the games begin. GL
I have done and seen plenty of PIT traders and PIT brokers hold Spread positions for days, weeks, months. And if you are standing in a pit with a membership your execution costs are pennies. And if there ever was a place where daytrading was king it was the Chicago and NYC pits. That should tell you something about spreads. It's a bigger game, and there's more dimensionality to it.
Unless you are slaving away at some cheapskate prop firm who won't let you carry a position overnight (which is cheapskate servitude bullshit btw) then why even ponder the notion of daytrading spreads ? You're giving away your advantage just to be flat at the end of the day. Even OTC swap guys who are on desks making markets are hedging and carrying Spread positions - no choice in the matter for them; they have a book.
I mean, there's no cheaper leverage to carry overnight than a proper exchange recognized Spread. I've got beaucoups guys carrying a several small lot Spread positions overnight and I would proffer that their total margin is certainly no more than $10K.
Unless you are slaving away at some cheapskate prop firm who won't let you carry a position overnight (which is cheapskate servitude bullshit btw) then why even ponder the notion of daytrading spreads ? You're giving away your advantage just to be flat at the end of the day. Even OTC swap guys who are on desks making markets are hedging and carrying Spread positions - no choice in the matter for them; they have a book.
I mean, there's no cheaper leverage to carry overnight than a proper exchange recognized Spread. I've got beaucoups guys carrying a several small lot Spread positions overnight and I would proffer that their total margin is certainly no more than $10K.
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All the classic books on derivatives talk about it. But, everything you see is too academic. Exchanges and brokers talk about it on an elementary level. Sales brochure like. You really need to talk to someone who has been running spread strategies for years. More importantly, over several business cycles.
Thanks Propwarrior and Bone,
I only just very recently learnt about spreads and I'm heading straight for the stirs as they look much slower to learn on. I've been going through a list of symbols at various exchanges modeling calendars, flys , condors, box spreads, packs, bundles, etc etc, various combos of prompt to back months, and spreading all of the above against each other on the chart to see how everything changes. The CL fly in the OP was the first time I had ever found anything like this so I wanted to ask about it. I've mainly learnt that some products trend nicely and some mean revert regardless of what you try to do to them. I've already read everything both you and bone and many others have ever posted (or that ET still has on record) and many university papers on the net as I have a lot to learn. Next I need to get a better computer set up with CTS T4, and watch the orderflow and charts of the exchange listed spreads.
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