Sample Futures Spread Portfolio Capital Requirements (CHEAP)

[bone]

I wanted to show the capital requirements to carry a diverse futures spread portfolio of positions overnight. IMHO, it's the cheapest and smartest leverage in the entire industry. Take advantage of it.

It's cheap because all major futures exchanges extend substantial margin credits to spread positions. For example, on the CME, look at the SPAN margin rates in the inter market and intra market tabs. The reason it's smart is because your exposure is diversified. Simply go to the product market spec page, and then the margins tab. In the margins page, you will see tabs for intra ( same product, different months/years ) and inters ( different products, highly correlated ). You should also be aware that exchanges have inter-exchange agreements to cross-margin. For example, the CME will extend margin credits for Dow futures versus ICE Russell futures positions. Depending on volatility scans between products, the margin credits can be substantial. For example, initial margin on CL is $3,740 per today's CME SPAN run. Initial margin on a May-June CL Calendar Spread is $385. Initial margin on a CL Jun-Jul-Aug-Sep Condor Spread is $198. For that kind of budget, you can trade in a more relaxed and confident state of mind. You can afford to carry positions for days, weeks, or months. You can take heat and drawdowns. You can let winners run.

It's smart because you are diversifying your market exposure. Think about it: the initial margin requirement to carry one ES future contract overnight is $4,758.

Look at the initial margin requirement to carry a broadly diversified futures spread portfolio overnight:

2 NQ versus 1 ES: $3,374
1 CME mini Dow versus 1 ICE mini Russell: $2,100
Eurodollar Jun14-Sep-Dec-Mar Condor: $148
5 ZF versus 3 ZN: $1,964
2 ZF versus 1 ZN: $655
2 Eurodollar Dec '21 versus 1 ZF: $957
1 Jun14 Eurodollar vs 2 Sep Eurodollar vs 1 Dec Eurodollar Butterfly: $82
1 NG 3/15 vs 2 NG 4/15 vs 1 NG 5/15 Butterfly: $688
1 NG 4/14 vs 2 NG 5/14 vs 1 NG 6/14 Butterfly: $385
1 CL 4/14 vs 2 CL 5/14 vs 1 CL 6/14 Butterfly: $440
1 CL 5/14 vs 1 CL 6/14 Calendar Pair: $385
1 CL 12/14 vs 1 RBOB 12/14 Crack Spread: $1,760
1 HO 12/14 vs 2 HO 1/15 vs 1 HO 2/15 Butterfly: $165
1 ZC 5/14 vs 2 ZC 7/15 vs 1 ZC 9/14 Butterfly: $540
1 ZB 7/14 vs 1 ZB 9/14 Calendar Pair: $189

 

[xandman]

Seems enticing. However, a lot of products trade with so little volatility that it seems necessary to trade mostly ATM.

Do you think PC-SPAN is a necessary part of your trading platform ( At least to manage margin volatility )? Most Futures Options platforms make me feel naked.

 

[bone]

Seems enticing. However, a lot of products trade with so little volatility that it seems necessary to trade mostly ATM.

Do you think PC-SPAN is a necessary part of your trading platform ( At least to manage margin volatility )? Most Futures Options platforms make me feel naked.

Just to clarify, these are futures positions, not options or options on futures positions I listed in the original post. I have clients using different trading platforms, including IB TWS, TT, CTS-4. We find that using the exchange supported spreads ( where the exchanges matches and fills the various spread combination legs for you ) is of great benefit.

 

[J-Law]

Bone,
Almost love the fact that there has been all but 1 response to this post.
The lion's share of the trader community just doesn't get it.

Works for me!

 

[running_bare]

Given the thrust of your pitch appears to be cheap margins, this will attract pikers.
(99.5% of ET have an a/c size < $100,000. In general, those with join dates on/after 2010 usually have a/c size < $10,000)

Unfortunately pikers can't afford the consultancy fee

IMO if the fee was not more than $5000 - a key psychological shopping price point - you would attract greater volume of takers, maximizing revenue/profit.
Not making any judgement on the value of consultancy whether it is is or isn't worth the existing price at all

 

[Handle123]

Given the thrust of your pitch appears to be cheap margins, this will attract pikers.
(99.5% of ET have an a/c size < $100,000. In general, those with join dates on/after 2010 usually have a/c size < $10,000)

Unfortunately pikers can't afford the consultancy fee

IMO if the fee was not more than $5000 - a key psychological shopping price point - you would attract greater volume of takers, maximizing revenue/profit.
Not making any judgement on the value of consultancy whether it is is or isn't worth the existing price at all

I am not a customer nor taken Bone's service in any way. But given his length years of producing profits which he will share statements to show you which I might add 99% of vendors will not do, I doubt he makes more as a vendor than in trading profits. Profitable educators are tough to find and because of this, he is most likely not going to want to work with people who don't have the funds to really commit to becoming a good trader. Taking time and teaching others is tough. I was a vendor years back, either missing trades or forgetting to put in targets cause someone asking questions during trading hours will cost anyone money. And what Bone charges is almost nothing of what I charged. Have to spend huge amounts of time with people, keep pounding same concepts into them, and changing how they think cause of years of losses is extremely tough. I actually believe he doesn't charge enough. Good educators charge enough for keeping them interested in dealing with a student, not wanting to work with masses of people. In my case most of fee was out of their profits, and often worked with them for two years. And now I have zero interest in teaching, it is just too time consuming for my time now.

I been trading spreads for little over a year, and they are very profitable and wished I had gotten into them more 30 years ago. So finding some one to teach them is very uncommon in futures trading.

 

[dandxg]

I wish I had run across someone , offering to educate on spread trading futures before I tapped out. Not til the end. Just a bit too late.

Looking forward to more.

 

[bone]

Given the thrust of your pitch appears to be cheap margins, this will attract pikers.
(99.5% of ET have an a/c size < $100,000. In general, those with join dates on/after 2010 usually have a/c size < $10,000)

Unfortunately pikers can't afford the consultancy fee

IMO if the fee was not more than $5000 - a key psychological shopping price point - you would attract greater volume of takers, maximizing revenue/profit.
Not making any judgement on the value of consultancy whether it is is or isn't worth the existing price at all

Quite frankly my more experienced clients think I should charge a lot more - especially since I have a habit of being fairly selective about who I take on as a client. I have not in the past and do not intend to have any sort of "trading academy". I work with just a handful of clients at a time. I have clients who start trading live with $15k, and I have clients with multi-million $$ accounts, so making rash generalizations about my clientele demo isn't fair. I'm looking for a certain background and persona in a potential client.

Yes, spreads are the cheapest futures leverage going. But that's only one advantage over flat price. There's a great deal of dimensionality and flexibility to designing spread combinations. IMHO it's the most portable strategy in terms of future employment with funds and prop firms - they're risk averse and want to generate alpha oriented returns.

Most professional spread traders will tell you that spreads just simply "behave" better, trend better, and have much smoother price action than flat price instruments - especially if you are staying away from the prompt months when building your combinations.

So, I seriously doubt that in the business of trading that $2500 in a fee price point for a serious, proven professional trading methodology is a killer. I am simply not competing with all the hack snake oil salesmen. The fact that my clients do quite well with it, and are willing to speak independently with a good qualified prospective client makes it a bargain at $7500.

Besides - my fee is peanuts compared to how much $$ the " pikers" as you call them piss away screwing around with one lot futures trying to figure it all out.

So, I respectfully disagree. I'm thinking about raising the fee quite frankly.

 

[ballsofgold]

Bone,
Almost love the fact that there has been all but 1 response to this post.
The lion's share of the trader community just doesn't get it.

Works for me!

thats bc its much harder than what it sounds.

you have to find a the right strategy in order to reap the benefits of spread trading with cheaper margins.

the spreads that bone has listed as an example are not ones that have any real edge.

the flies, for example, you have a 4-6 tick bid/ask. you have a 20 tick volatility so you struggle to get in and out to make a buck. then you put on more size to take out your 5 ticks and you say, ok its working i am making money. the one day you are loaded up and the curve moves and you are offside 30 ticks and you have wiped out 2 weeks worth of trading. same thing with the fixed income stuff.

the cme cracks are pretty directional. the gasoilbrent crack is a bit easier.

i wont be surprised if bone has some stuff that he is not sharing bc he charges a fee for it, but none of the stuff in the title is anything to jump out of bed for.

 

[bone]

Those spread combination listed in the original posts were pure random examples of SPAN initial margin rates - nothing more implied or intended. Just illustrating some capitalization costs.

My clients would draw and quarter me for sharing IP that they've contracted rights to and paid for.

Having said that, we do really well with butterfly and condors.

Your interpretation of "edge" is your interpretation.