Seasonal spreads

I've added three more contracts to the May 08/Sep 07 Wheat spread originally entered July 13th. The new contracts has been added at +2, +1 and -1 which brings the total position to:

Long 5 May 08, Short 5 Sep 07 ZW Wheat @ 1.7
 
Today I've added to the positions in Gasoline and Heating Oil:

1 contract in Nov 07/Feb 08 RB Gasoline @ -0.0210
1 contract in Oct 07/Feb 08 RB Gasoline @ 0.0080
1 contract in Dec 07/May 08 HO Heating Oil @ 0.0920

This brings the positions to average:

Long 2 Nov 07, Short 2 Feb 08 RB Gasoline @ -0.0230
Long 2 Oct 07, Short 2 Feb 08 RB Gasoline @ 0.0040
Long 2 Dec 07, Short 2 May 08 HO Heating Oil @ 0.0960

I'm quite excited to see how these positions develop over the next couple of months. My calculations on risk etc are much more confident in these positions than my gutfeeling :)
 
Your thread got me interested in spreads hrokling. Thanks for the Journal.

I'm starting to play along, put on my first spread today.

L ZW MAY08 @ 620-1/2 ------ S ZW SEP07 @ 619-1/4 === (-1-1/4)
 
Quote from hrokling:

I've added three more contracts to the May 08/Sep 07 Wheat spread originally entered July 13th. The new contracts has been added at +2, +1 and -1 which brings the total position to:

Long 5 May 08, Short 5 Sep 07 ZW Wheat @ 1.7
More...
Is averaging down part of your plan? How far would you go? Is there a stop in place?

So what is the rational of this spread and how long do you plan to hold? Sorry if I missed the explanation but I couldn't find it in the thread. Thanks.
 
Quote from stupididiot:Is averaging down part of your plan? How far would you go? Is there a stop in place?

So what is the rational of this spread and how long do you plan to hold? Sorry if I missed the explanation but I couldn't find it in the thread. Thanks.
More...

I've now worked the account up a bit, and I've also been working a bit on position sizing, risk and so forth. I'm planning to go into details regarding this in a couple of weeks (when my holiday draws to an end). Previously I usually entered one-lot positions, but now it's much more common with at least two lots.

On some of the spreads the entry-point is somewhat vague when I chart the spread, and I then try to bid (the initial contract) in the spread at a place I feel is good value. I also add in a bid for a new unit further down, and then gradually move up as time goes so I get my full position without the trade running away from me.

So it's not really adding to a loser or averaging down to move the breakeven point lower, but scaling into the full position to be more confident the entry is an average of the time where the spread should be entered.

I've also started to calculate stops, but these are "soft stops" and a function of time and historical risk of the spread. I'll write more on this in a couple of weeks as well.

Quote from kahai:hrokling,
On the RB Oct 07/Feb 08 did you not mean -0.0040 rather than +0.0040?
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Today I added the 2nd contract at 0.0080, and with the first contract at even the average of this position is 0.0040. It's a bit confusing when it's all hovering around even :)

2006, I'm glad you're enjoying it - it's been a fun and profitable experiment so far although my discipline has been sorely lacking with the failure to enter the CL-spread earlier this month!
 
Long 2 Nov 07, Short 2 Feb 08 RB Gasoline @ -0.0230
Long 2 Oct 07, Short 2 Feb 08 RB Gasoline @ 0.0040
Long 2 Dec 07, Short 2 May 08 HO Heating Oil @ 0.0960

hrokling,
On those spreads what is your profit target and how long to you intend to hold them?

What do you figure is now your new capital requirement with the increase in positions?

Are you trying to follow any position sizing theory or do you have any favorites from any books etc?

Sorry for all those questions.
 
Quote from stupididiot:So what is the rational of this spread and how long do you plan to hold? Sorry if I missed the explanation but I couldn't find it in the thread. Thanks.
More...
Sorry, I forgot to answer to this part of your post. This trade is a seasonal pattern of the carrying charge in Wheat. From 1986 to 2005 it was profitable 18 out of 20 years. I plan to exit around August 20th.

I don't usually post that much about each trade, since it's not fresh in my mind. I looked at all this when I did my trade selection in March/April - but since then I mainly just look at my preplanned entries and exits.
 
Quote from kahai:
On those spreads what is your profit target and how long to you intend to hold them?

What do you figure is now your new capital requirement with the increase in positions?

Are you trying to follow any position sizing theory or do you have any favorites from any books etc?
More...
My profit target is about 1.500 usd per contract in the RB spreads, and about 2.700 usd per contract in HO. My profit calculations are quite crude so who knows how it'll turn out. Btw right now it's possible to get much better entries in RB!

I'm basing these calculations of an account size at around 30-35k usd.

Calculating position size is pretty difficult, and everyone has a different risk profile and tolerance. I don't even know some of the basic risk parameters yet, but I have some sort of system in place which I hope to work more on through August.
 
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