Seasonal spreads

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<I>Quote from hrokling:</I>

<B>I've worked through MRCIs Encyclopedia of Commodity and Financial Spreads
and selected the ones I think have most merit </B>
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Hi hrokling

Would you say what criteria you used to detirmine merit ?
 
Quote from britefire:
Would you say what criteria you used to detirmine merit ?[/B]
More...
I'm glad you asked that excellent question :)

EDIT: As you can see from below, my criterias were quite subjective.

I started my journey into seasonal commodities trading knowing nothing about the floor traders on the exchanges, the dynamics of the various markets or how various commercials (and also funds) operate.

I wanted to trade electronically, so I had to make sure I would be able to get at least some liquidity on Globex/eCBOT. Luckily this has grown a lot over the last year, making it at all possible.

MARKET SELECTION
I first excluded Forex and almost everything regarding interest rates because I was very skeptical to seasonality here. Obviously liquidity relating to public spending and financing as well as taxes can play a part - and this can be different from one economy to another - so I'm not saying you cannot make the argument. And indeed, I have included a few Eurodollar spreads as well as a few with treasuries.

I excluded Metals because I didn't understand the seasonality. Yes, it's the holiday sales of gold, but hmm... I was just skeptical of the whole thing.

I excluded Meats because the liquidity was thin, and the trades presented didn't seem that good.

Many of the "Softs" were excluded due to liquidity.

So Grains, Soybeans and Energy became the main markets.

Let me also add here that I'm just explaining how I viewed market selection at the time, knowing very little about them. I'm quite sure it's possible to find good spreads in almost all the markets I excluded (although I'm still quite skeptical towards Forex).

SPREAD SELECTION
A large number of potential spread trades is found in the Encyclopedia. I wanted to focus on trades where the percentage of success was very high and/or there was a cluster of trades in the same direction and possibly involving alternative contract months as well. This was very discretionary, and would probably end up quite different if I were to do it again.

I am planning to work on my arsenal of spread strategies, but I'm not going to talk much about it in this journal as this is a chronicle of my original spread selection. It's more a story of how an equities trader and commodities rookie took on seasonal spreading.
 
Supreme Trader:

For what it's worth, and certainly in no offense my friend, but "flip it" means opposite where I come from. Maybe "flip it" isn't a good term or maybe it's in the trading jargon somewhere? I've never heard it used quite like that, but that doesn't mean it hasn't or shouldn't. Sometimes we think we are clear when we aren't. I regard your inputs here very much.

All the best!
 
Long 2 Nov 08, Short 2 Nov ZS Soybeans @ 14

I had this pegged for entry in a few weeks, but find little downside and think I got in at a good price with my limitorder. Looking to hold for close to two months.
 
Wow, this was quick. The Corn spread from last week reached my profit target at 49 1/2, so I'm already out of it!!

Sold 2 Dec 08, Bought 2 Dec 07 ZC Corn @ 49 1/2 - CLOSED - PROFIT 7 3/4 which is 775 usd.
 
Quote from Medowz:

Supreme Trader:

For what it's worth, and certainly in no offense my friend, but "flip it" means opposite where I come from. Maybe "flip it" isn't a good term or maybe it's in the trading jargon somewhere? I've never heard it used quite like that, but that doesn't mean it hasn't or shouldn't. Sometimes we think we are clear when we aren't. I regard your inputs here very much.

All the best!
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Hi Medowz:

Yes, flip it means reverse it or take the opposite direction.

Once more the following is my statement.

"Do not be entrapped by past records. They are simply guides. If you are intent on trading the ZNZ7-ZFZ7 Spread, then watch out for a reversal and then flip your spread to ZFZ7-ZNZ7. Don't trade in only one direction. Just follow the price."

"The ZNZ7-ZFZ7 Spread" is the trade or market . "your spread" is your position in the "ZNZ7-ZFZ7 Spread", trade or market. When this "ZNZ7-ZFZ7 Spread", trade or market reverses, then flip your spread or position to ZFZ7-ZNZ7.

I see your confusion with the small lettered "spread" and the big lettered "ZNZ7-ZFZ7 Spread". Next time I'll use position instead of "spread".

I hope this is clearer.

Have good day.
 
Quote from Medowz:

Supreme Trader:

For what it's worth, and certainly in no offense my friend, but "flip it" means opposite where I come from. Maybe "flip it" isn't a good term or maybe it's in the trading jargon somewhere? I've never heard it used quite like that, but that doesn't mean it hasn't or shouldn't. Sometimes we think we are clear when we aren't. I regard your inputs here very much.

All the best!
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Hi Medowz:

I have attached the actual chart for the ZNZ7 - ZFZ7 Spread. I hope the explanation on the chart makes it easier for you. If you bought 1 contract of ZNZ7 - ZFZ7 at A. When you flip your position at B, you buy 2 contracts of ZFZ7 - ZNZ7. This means you have sold the previous single contract you bought and you now have 1 reverse contract, ZFZ7 - ZNZ7 still in play.

That's it.
 

Attachments

SupremeTrader,
The chart you posted shows indeed nice trendlines to enter and reverse the ZNZ7/ZFZ7 spread.

Can I ask you a couple of question:
What indicator do you use to determine when to enter or reverse?
Do the other interest spreads like NOB, Eurodollar Calendars or TED (does anybody still use this one) also show such nice, relatively long trends?
What charting service do you use?

Thanks
 
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