Seasonal spreads

hrokling,

Thanks for starting this thread. I have been subscribing to the MRCI WSC for the past few months and then I came across this thread. Great info and it caused me to order the Encyclopedia this morning as I have been looking for additional calendar spreads to trade. I do not trade the non-calendar spreads, as I think they are too volatile and toomany other factors enter into those spreads beyond seasonality. But the calendar spreads are very different. Right now, I am in the Nov NG/Oct NG spread.
 
Today I've added one more contract to the Nov / Oct NG Natural Gas spread. The new contract was added at 1.000, and with the previous one from 0.970 I'm updating the entry to show:

Long 2 Nov, Short 2 Oct NG Natural Gas @ 0.985

I've been lurking under 0.900 to add for a week now, but am adding the 2nd contract to get the full size position on.
 
Quote from hrokling:

Today I've added one more contract to the Nov / Oct NG Natural Gas spread. The new contract was added at 1.000, and with the previous one from 0.970 I'm updating the entry to show:

Long 2 Nov, Short 2 Oct NG Natural Gas @ 0.985

I've been lurking under 0.900 to add for a week now, but am adding the 2nd contract to get the full size position on.
More...
Hi Hrokling:

If I were you, I would not have added another contract. I would stick with just one. The market could go in either direction depending on the effects of the hurricane.

I am not advising you to change your positions or close your trades. I am advising you to trade only one contract at this time. My signal actually tells me that you are in the wrong direction at this time. Anything can happen later depending on the weather but for now, you are in the wrong direction.

If you have the chance to close out one of your positions without losing any money, do not hesitate to do so.

My best wishes.
 
Hi SupremeTrader

I have a question about the spread trading position management.

There are two ways. One way is to create one position and add more latter,

another way is to put all positions at first, and exit separately.

Which way do you prefer in spread trading?

Or you prefer all in then all out?

Thanks.


If anyone have good ideas , welcome!
 
On 8/16 I posted my opinion about interest spreads and thought it was the best game in town at that time. It was based on the great seasonality patterns, the good correlation with the current contracts and most of all on the flattening of the 3 and 6 month libor yield curve which indicated buying the further out maturities over the nearer ones which coincided with MRCI's recommendations. I thought opportunities like this are rare and went out on a limb by loading up on 40 Eurodollar and 10 Note contracts. This night I liquidated the GE Sep08/07 contracts and together with the other liquidations show a realized profit of $22,675 for the interest spreads so far- it feels good to be right once in a while. I am still holding 20 GE Dec08/Dec07 and 10 ZN Dec07/ZF07 contracts but might liquidate soon - the risk is that the Fed might inject much more liquidity than the market is presently anticipating which would cause a steepening of the yield curve and work against my positions.

I might add that I would have never added so many contracts if I only had a $50,000 capital base but I got freed up margins from other systems which I am not trading this month like stock index credit spread because of the present unpredictable stock market. My margin for the interest contracts together with all the other MRCI spreads got up to $45,000, way too high for a $50,000 account.
 
Quote from tansungte:

Hi SupremeTrader

I have a question about the spread trading position management.

There are two ways. One way is to create one position and add more latter,

another way is to put all positions at first, and exit separately.

Which way do you prefer in spread trading?

Or you prefer all in then all out?

Thanks.


If anyone have good ideas , welcome!
More...
Hi Tansungte:

Before I answer your question, I'll state the following regarding my telling hrokling to reduce his Gas contracts to one. In 2005, a lot of Oil and Gas Traders where wiped out because of Hurricane Katrina. The volatility made it very difficult to get out quickly and the front months rose much faster than the back months. Hrokling bought the back month and sold the front month, and the Hurricane season is not over yet. In case the market goes against him because of the hurricane, he can handle a single contract much better than two contracts and protect his profits.

Now, in response to your questions, I'll say that I do both. When I'm very certain that the market had bottomed and starts to rise, I can initiate 10 contracts right from the first go. If it continues to rise in my direction, I increase my contracts with specific formulas I use. If the market starts dropping I also decrease the number of contracts with the same formulas.

In instances that I am not sure the market has bottomed or not, I start with a Pilot of 3 contracts backed by a very tight stop. If the market then moves strongly in my direction, I increase my contracts to 10 and add more as it goes forward. If it turns against me, I will once more reduce my contracts or close out all my positions, depending on market conditions and whether my stop is hit.

Position sizing and money management go hand in hand. No matter how great the market is, I never use more than 30% of my investment fund. For example in a $100,000 account, the maximum I trade with at any one time is $30,000, leaving a cushion of $70,000. Whether I am making more money or losing money, I always stick to this 30% rule. My position sizings for all the contracts and trades are done within this 30% or $30,000.

I hope I answered your questions.

Have a good one.
 
I've been a bit busy the last two days, but of course noticed how the NG spread totally tanked right after I added the second contract.

Yesterday I sold one contract at 0.950, and I just sold the other at 0.970 making it an average of 0.960.

Sold 2 Nov, Bought 2 Oct NG Natural Gas @ 0.960 - CLOSED - LOSS 0.025 which is a total loss of 500 usd.

SupremeTrader, I appreciate your comments regarding the position size but I'm going to stick with my plan with regards to the number of contracts. I'm also not considering fundamentals or common sense, just the statistics of previous years. Don't let this put you off however, I find it very interesting to read what you think and am sure many others on the thread share that view. Keep it coming!

The 2nd contract was added at a very bad time, and the spread went right through stoploss shortly after. The powerful bounce made it ok though and the exit would probably have been about the same if I'd had time to watch the market that particular day.
 
Late yesterday I got filled on a limit order:

Bought 1 Nov 07, Sold 1 Dec 07 NG Natural Gas @ -0.904

My limit order was at -0.900, so I thank IB for those extra 40 usd. The IB spread charting isn't working so well right now, but I have a feeling this was an extremely lucky fill. I had left the order in for a few days.
 
I wish my intraday charting was working, as I'd like to be looking at that whilst explaining the rationale.

First of all, I had the entry on the Nov/Dec NG spread pegged for Oct 10th, so this is just way earlier than intended. However, I've been looking at the NG spreads for a good while now and last week I decided that -0.900 would be a good place to start building a position (it was then trading at around -0.850, and far less volatile than the Nov/Oct NG spread I was just in). My intended position size is 3 contracts, but depending on how it develops through September I may not get all. I've also developed a view (from charts) that we may have seen a bottom / top in the NG spread moves, remember the move started earlier than it's done in previous years (seasonals).

From MRCIs encyclopedia this move is based upon expiration and rollover as well, so it'll be interesting to follow. I have already put in a limit order at -0.650 to take profit if it continues soaring like it has today. I'm looking to add more later in September, unless the profit target is reached.

It was indeed a lucky fill, and the timing of my execution was 00:00:01 which makes me suspicious it may have been a market order from someone as Globex-trading opened after the weekend. I didn't really expect this to get filled so easily, but sometimes you have to have some luck as well.
 
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