International futures market spreads

F

fortunatti

Running spreads between international futures markets...

For example, spreading cbot soy futures and Brazil Merc & Futures exchange soy futures.

Inefficiencies exist in both floor traded contracts and the markets in general, combine this with macroeconomic and basis info and I'd think great opportunities would be ripe for a resourceful trader.

Not a trader myself (yet), but work in the business and am just looking for more information on this. Any traders working this particular or other similar ag/commodities spreads? Info/direction much appreciated as always.

Cheers
Fortunatti
 
fortunatti,
Don't really write here often, but... Check out coffee in the US and middle-east. You'll notice a disconnect there too.
 
neilcharlton,
You're right, you'll need a good broker, but there are ways of getting access to exchanges without having access to the direct markets. I’m not a client of IB, but I believe IB can route orders to various futures exchanges (internationally).
Market access is only part of the equation, however. You'll need to discount various fees against the local and landed prices. For example, when one trades the physical arbitrage between crude oil, you'll need to discount shipping costs, insurance, duties, etc.. If you have access to Bloomberg type: ARB [Go] and you’ll get the premium/discount in the physical markets.

If you aren’t going to trade physical arbitrage, you’ll still need to factor in the pricing of fees (shipping, duties, etc.), otherwise you’re pricing model won’t be accurate enough to determine the fair-market value.
 
Spddst

is their a middle eastern futures exchange for coffee ? I've never come across one ?

I've looked at the Brazilian Merc , i think a lot of their contracts are pit traded not electronic access so i'd imagine getting the price you want will be more difficult !

Do you trade oil futures vs actual oil ? Bit like cash bond basis trading i'd imagine ?

thanks for your input .

Quote from Spddst:

neilcharlton,
You're right, you'll need a good broker, but there are ways of getting access to exchanges without having access to the direct markets. I’m not a client of IB, but I believe IB can route orders to various futures exchanges (internationally).
Market access is only part of the equation, however. You'll need to discount various fees against the local and landed prices. For example, when one trades the physical arbitrage between crude oil, you'll need to discount shipping costs, insurance, duties, etc.. If you have access to Bloomberg type: ARB [Go] and you’ll get the premium/discount in the physical markets.

If you aren’t going to trade physical arbitrage, you’ll still need to factor in the pricing of fees (shipping, duties, etc.), otherwise you’re pricing model won’t be accurate enough to determine the fair-market value.
More...
 
You will probably have to put up full margins on both sides. You might lose out on one of the main advantages of trading exchange recognized spreads. The reduced margin is partly responsible for the tremendous "returns on margin."
 
don't get it. You're doing spreads over different markets. No problem with off-setting once postions in the secondary market, albeit commission but spreads are rarely applied as a high-freq. strategy.

Quote from Spddst:

neilcharlton,
You're right, you'll need a good broker, but there are ways of getting access to exchanges without having access to the direct markets. I’m not a client of IB, but I believe IB can route orders to various futures exchanges (internationally).
Market access is only part of the equation, however. You'll need to discount various fees against the local and landed prices. For example, when one trades the physical arbitrage between crude oil, you'll need to discount shipping costs, insurance, duties, etc.. If you have access to Bloomberg type: ARB [Go] and you’ll get the premium/discount in the physical markets.

If you aren’t going to trade physical arbitrage, you’ll still need to factor in the pricing of fees (shipping, duties, etc.), otherwise you’re pricing model won’t be accurate enough to determine the fair-market value.
More...
 
If an inter-exchange spread trade of international futures has a time span over many days and the prices of the trade may involve two currecnies in two exchanges, the change of currency rates during the days may produce a signficant impact to the P/L.

Are there any effective ways we can handle this currency overlay issue by reducing its currency risks?
 
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