How do you approach trading spreads like this?

[jokertrader]

Wanted some interpretation on this.. i did find an exchange traded fly for Nat Gas.. but only 1 (i guess have to ask CQG what happened to the rest... unless for all the remaining it has to be synthetic.
(will post crude flys next)

Here it is for Nat Gas.. im seeing only 1 .. not sure what that means

Here is the chart

 

[jokertrader]

Now for the Crude flys.. i see more than 1 (only a few with volume)

Now to chart some : Here is the one with CLE6 (which i am assuming is a 6 month fly)

Just sharing as homework.. please bear with me as i understand it all (ha ha at least what i am looking at)

 

[i960]

CQG uses encoding for the symbols. You don't see "one" fly, you see the base symbols for a few different flies laid out by width.

Go here: http://help.cqg.com/cqgic/default.htm#!Documents/exchangetradedstrategysymbology.htm

Interval:

Usually 1, 2, or 3

For example, a Eurodollar butterfly spread, quoted in .50 tick increments, is a combination of two calendar spreads:

Buy 1 = Leg # 1 
Sell 2 = Leg # 2 
Buy 1 = Leg # 3 

EDAL3M9 represents EDAM9 - 2*EDAU9 + EDAZ9

Try something like this: SPREAD(CLES6Z7-CLES6M8)

You're only going to get mileage out of exchange traded flies with something like STIRs. Energy has them but they lack volume, which is why the whole "cal vs cal" discussion has been had.

 

[jokertrader]

ok got it.. so to summarize: is this all correct?

a) If i am looking at energy (CL, NG) and Agri Flys.. then synthetic flys is the way to go even though exchange flys may exist due to lack of volume (combo of 2 calendar spreads where there is plenty of volume) - thanks for the CQG suggestion .. will try it out

b) SPREAD(CLES6Z7-CLES6M8):
CLES6Z7 is CLE: Crude, S6: 6 month, Z7: Dec 2017 - so this is Dec17/June18
CLES6M8 is CLE: Crude, S6: 6 month, M8: June 2018 - so this is June 18/Dec 18

So this means.. Dec2017/June 2018 and June 2018/Dec 2018 synthentic fly

c)Chart and DOM

 

[i960]

ok got it.. so to summarize: is this all correct?

a) If i am looking at energy (CL, NG) and Agri Flys.. then synthetic flys is the way to go even though exchange flys may exist due to lack of volume (combo of 2 calendar spreads where there is plenty of volume) - thanks for the CQG suggestion .. will try it out

Correct, not only do they chart better (there's more actual data to work with), but they're easier to execute against (energy flies do not use implication on both CME and ICE [it's lame, go back a few pages and you'll see the discussion around it]). Cals are the basic building blocks of any spread construction here - you can make anything with cals (from flies to condors to double flies to extended double flies), and the cals are usually fairly tight. The only case in which exchange traded flies would be better is if they had implication turned on and the bid/ask spreads were actually tighter. Those would induce more volume - which would make them more useful for charting as well. Sadly, none of that has happened.

b) SPREAD(CLES6Z7-CLES6M8):
CLES6Z7 is CLE: Crude, S6: 6 month, Z7: Dec 2017 - so this is Dec17/June18
CLES6M8 is CLE: Crude, S6: 6 month, M8: June 2018 - so this is June 18/Dec 18

So this means.. Dec2017/June 2018 and June 2018/Dec 2018 synthentic fly

Correct. June is the center/body, Dec the wings.

c)Chart and DOM
View attachment 172427

It should look like this:

And yours mostly looks like that, so you're good.

 

[i960]

So are you avoiding the first three months in the exchange traded calendars that make up the "synthetic flys", and also avoiding these three months in the "exchange traded flys" etc as well?

Let's say WTI is trading June right now, so don't trade any structure involved with M, N, or Q; and yes you'd also avoid the native flies involving those months as well (but you should avoid them, period).

I'm loving the exchange spreads as I can set my stops and targets and walk away from the screen - thanks Peter!

With cals yeah, but with the flies (and any condors) you're asking to get ripped off badly with stops on those. They're literally their own markets pretty much.

 

[bone]

I just love all this great discussion about Spread construction !!

I am so pleased to see mainstream traders outside the world of prop, HF, bank desks discovering the incredible world of opportunities. Yes - retail traders can profitably trade futures spreads, especially if they take advantage of the low margins and carry them in a swing trading fashion. And there is plenty of bid/ask liquidity to lever.

As I've mentioned before, and as others have also mentioned, it's your better option to leg one exchange calendar Spread vs another to put on a butterfly or Condor. I will model one exchange calendar pair vs another in my charting as well.

In terms of execution, I don't ever attempt to sell one pair at offer and buy the other pair at bid - that's asking for trouble. I will set up my order book price ladders side-by-side, and for example if I get hit on one bid I will immediately hit the other bid. Since I'm swing trading and looking to take fairly big chunks of trading range, this approach works just fine for me.

 

[Adam777]

As I've mentioned before, and as others have also mentioned, it's your better option to leg one exchange calendar Spread vs another to put on a butterfly or Condor. I will model one exchange calendar pair vs another in my charting as well.
.

Most of the guys here have been talking about CL etc which have no exchange traded flys but only calendars, hence using calendars to make flys. ... I understand this from what you said earlier.

I'm more interested in Stirs which already has multiple exchange traded flys and condors. Maybe I misunderstood ... Do I use these flys, or do I avoid them and make my own out of calendars?

 

[bone]

Most of the guys here have been talking about CL etc which have no exchange traded flys but only calendars, hence using calendars to make flys. ... I understand this from what you said earlier.

I'm more interested in Stirs which already has multiple exchange traded flys and condors. Maybe I misunderstood ... Do I use these flys, or do I avoid them and make my own out of calendars?

Make a determination on how to proceed by looking at the exchange Spread order books. For example, with GE, there might be plenty of bid/ask liquidity on the exchange butterflies or Condors. But with Sugar or let's say ICE GasOil, you'd almost assuredly get more liquidity with an exchange calendar pair vs calendar pair.

 

[jokertrader]

Maybe a lot to ask but trying to understand:

Can someone explain how to interpret the
a) Nat Gas Curve and Crude curve
b) Calendar spreads

to try to see what effect there might be on the front month futures

alternatively.. is there a good comprehensive book that discusses this and calendar/flys in Nat Gas..