Index Spread Traders

qlai said:
Yeah, I think @REDP1800 is right about many things here ... I don't know why people get attracted to strategies which require execution quality that will never be available to them. Maybe because it backtests well(due to unrealistic fills).
But I really like this thread, so would like to hear what others say.
@Robert Morse and @MattZ , you both liked the original post, care to chime in this?

@bone , common man, you can comment on uselessness of orderflow, but you can't comment on any of this?
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Ok so in a Es/YM or s/NQ spread what "execution quality" that is not available to retail traders?
RED now says it is tradable but not long term! :confused:
Can RED and OP or for sure Bone! give a concrete example of such spreads not working and working
otherwise it is just a war of words
 
Hey dude. As far as I know, the E-Mini equity futures are about as good as it gets for a retail trader. They are certainly liquid during RTH and even after hours.

Sending a 2 lot in NQ and a 3 lot in YM is literally nothing. This kind of order would be completely irrelevant in terms of having any kind of an effect on the price discovery taking place in the CME or CBOT. The mini's are arbitraged against the bigs by HFT. You are not going to affect the market at all executing this type of a spread.

Just remember, these spreads have very significant institutional participation that is affecting price discovery however.
 
traderjo said:
RED now says it is tradable but not long term!
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He said below, so I assume he is talking about very short term deviations that theoretically could be scalped? I'm sure he will clearify :)

"all spreads are arb spreads in my opinion"
 
Real Money said:
The market breaks or rallies and one side gets stopped out. You close the other leg at a profit.
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I like the first example, but not understanding this one. Isn't it equivalent to placing bracket orders so you only get filled on the breakout leg? What's the advantage of holding both and closing one at loss if they are volatility adjusted?
 
It is like placing bracketed OCO orders above and below the range, but its also a spread trade.

Another thing you could do is spread with a small bias up or down by choosing different leg sizes. Then close one of the legs at your discretion whenever it is convenient. This could be during the rally or breakdown or after you think it is done.

It really is a very flexible strategy, especially if you can anticipate direction (they move in the same direction).

One thing it does do is make it much easier to choose a level to initiate your trade.

These ideas are very common in options trading.

Putting on positions with a small directional bias, and with flexible adjustments that can accurately be flipped or hedged off.

Options traders do exactly this type of thing.
 
These ideas are advanced so it is expected that people will say its stupid or foolish or amateur. Most people do not have cross domain expertise in futures, options, and the indexes and spread combinations. I'm not saying I do, and that's why these ideas are very interesting to me, as a trader with a strong preference for equity futures.
 
The fact is, if you are a small independent trader, (let's say you have about $100,000 account size) then futures are a very compelling tool to participate in the capital markets speculatively.

The capital efficiency with SPAN margin is arguably better (much better) than Reg-T margin. So, if you want exposure to equities and the margin flexibility of SPAN, then you naturally end up trading the E-Mini index futures.

The real problem is that the indexes can be very volatile. This means that you have to know how to reduce the 'open PNL variance' like i said before. Losses can explode very quickly while trading ES, YM, NQ, and RTY.

This means that learning how to spread these products can give you a set of tools that is not based on strict entry/exit criteria. It's a skill set that can be useful once mastered, much like options trading techniques. But, its not easy to acquire the necessary understanding of when and how to use these techniques. Also, you still need to have an ability to anticipate overall market direction (and vol).

Thanks for hanging out in the thread and being respectful of the people in it.
 
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you can trade any spread you want. some banks have spreads with 18 legs! u can spread corton versus live hogs. my point isnt that its not tradeable. u can make a profit doing anything but with this spread you will end up losing. due to slippage and fees!!! a 2x3 is 10 total contracts per round turn..ur talking about going mkt on both. and even a limit then mkt..ur still getting crushed. i said you could trade spreads long term for weeks or months and do ok but its the same with outright. the longer the time frame the less slippage n fees matter. this strategy which is weak is not directionless. apparently because people think spread trading is hedged trading they think they are safe from losses. why would u do all this spreading when u can do it more in 1 index for more points more times a day just trading the future. with less fees n slippage. my point is that yr going to spend huge learning money on this because demo is not real the charts arent real and it also is manipulated just as much as everything else. i found spread trading to be just as risky if not more risky and the returns or daily gains were so fleeting that once u take them ur like..all that for peanuts. but brokers love it. notice the first people to chime in? why? because they get double the fees. u still lose in the end.
the guy who started this is already coming up with all kinds of crazy ideas. like oco orders n stops etc. why would you take something and make it a directional trade. if ur trading direction anyone and everyone would agree just buy the outrights and hold. this thread is just like all the others. find what works for you n trade that. there is no wall of silence ur not a part of. there is no secret spread or order type. u just need to make a trading plan and your job is to stick to that plan!!
 
I prefer outright to spread too. You are just trying to big brother people on here apparently. Obviously outright will make you the best money if you are any good. These spreads are just a side thing to get small with imo or swing them.
 
Real Money said:
I started this thread because I just wanted to talk about strategies to manage what I would call 'open position PNL variance' and knowing about these inter-market spreads is useful. Put otherwise, you could say that being flat is very similar to being spread in a very low position variance spread.

For example, you short 2 NQ, market dips, starts to show reversing, so you long 3 YM. Market gets to a lower high (your still in profit). Close the dow contracts....market resumes bearish behavior.... you get the idea.

Thanks for adding to the discussion all.
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um..why wouldnt u just sell 2 nq and buy 20 micro nq? buying 3 ym does what for you? sure a hedge but if ur better iff exiting n rentering
 
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