Seasonal spreads

Medowz,
A friendly reminder: All you have to do is go to the first page of this thread and read hrokling's first post and all will become clear
 
I reread the first thread. What threw me was the use of the MRCI encyclopedia and not the MRCI service. OK, thanks for that, kahai.

As for the trading preference though, I assumed that most of the trading was open outcry vs electronic. Should one assume that trading via IB is electronic? Trading online isn't necessarily "electronic", right?
 
Medowz,
I let hrokling answer that question but I am sure that he does everything electronically as do I and most everybody who uses IB, although, some trades can be sent to the floor with IB.

hrokling,
Wheat is indeed going crazy, my two spreads are now (3:15 am ET) up almost $4,500 in less than two full days. I wonder if today's USDA report will throw a monkey wrench at the party or is it a possible leak which causes the surge? Anyway, I am not complaining about my experiment of substituting ZW for KW.
 
kahai,

I am using IB. I managed to get in the spread yesterday. What happened was that initially I used the ComboTrader and created a ticket. No matter how I changed the limit price, there was no transaction. Then yesterday, I tried to create a new ticket instead. This time it worked and I realised that it was routing to SMART instead of Globex which didn't work.


Quote from kahai:

Joryan,
Which broker are you using, electronic or floor? While I took the last Lean Hogs spread - Feb08/Dec07 which shows already a nice profit and moves according to the seasonal chart (I leg into those a couple of minutes before the floor closing) - I stayed sofar away from Cattle, the electronic liquidity is very poor, much worse than Hogs. Let's ask hrokling if he is brave enough to take those spreads.

hrokling,
I am doing this as an experiment without much rationality and will report how it works out compared to the MRCI spread. Wheat seems to be in a blow off stage, I wonder if it will collapse. BTW my entry yesterday was just before 14:00 New York time, not 8:00 as I mistakenly stated. Right now the 2 spreads are up about $1,400.

Does anybody have any comments regarding being able to keep electronically control of spreads entered through a floor broker?
More...
 
Joryan,
That is very interesting, I did not know that it would work with SMART. I am still not clear, did you leg in or use the combo? Did you type in SMART in the combo ticket the second time instead of GLOBEX? Was there any volume showing for Live Cattle? Was there a large bid/ask spread?

What price did you get? MRCI entered it at the close of 8/29 at a spread of -29.7.
 
Joryan,
I can't believe it but apparently, at least for certain globex futures, one can now enter intermarket spreads at IB via the order ticket. I just tried it for your Feb08 HE/LE spread and it worked - good job. I hope in time this will be possible for all markets.

hrokling,
Regarding the wheat spreads, well it happened, when I saw them dwindling today to nothing I got out at a small loss. Should have done what I normally do with currency spreads, whenever there is a one or two day big move in my direction I take profits.
 
Quote from kahai:

If we now anticipate a rate cut by the Fed would that not cause a steepening of the yield curve? (short rates going down and long rates remaining the same or even going up because of inflation fears). If so, in your opinion, is it time to get out of those spreads or even look for a reversal?
More...
I apologize if someone else has fielded this question. (And the last few weeks have seen some exciting fixed income activity, so the question may be moot anyway)

I find it helps to think about someone managing a large portfolio of fixed income assets--with all sorts of maturities (30 yr, 10 yr, 90 day, whatever). The weighted average combination of these maturities is the "Duration".

Let's say you're long 2 yr, short 30 yr bonds. You're expecting the market to shorten its duration. (i.e. prefer short term maturities to long term ones) Why would people shorten their duration? There are many reasons, but two key ones:
1) Inflation. You prefer shorter term bonds to longer term if inflation is a concern.
2) Rising interest rates. If rates are heading up, you prefer shorter maturities.

The situation you described is correct. In the event of lowering interest rates, you want to be locking in the higher rate for as long as possible, hence preferring the long maturities to the short ones.

Where it gets interesting is when you think about interest rates in the context of inflation. If the economy is doing okay (one jobs report is spurious, and many earnings estimates are healthy), lower interest rates could cause inflation to skyrocket. (Near full employment, several commodities at all-time highs)

So, lower rates could cause high inflation. Now which duration do you want? :-)
 
FullyArticulate,
Thanks for the reply - lots of food for thought - and, as I was afraid, there is no easy answer. Out of curiosity, in your own spread trading are you using fundamental, technical or seasonal analysis?

It is good seeing you visiting this thread again and I am sure everybody will appreciate your comments - keep it coming.
 
The spread in Soybeans hammered through my stoploss, and I was unfortunately tied up all day yesterday (bad timing indeed). However I got out at the night session now:

Sold 2 Nov 08, Bought 2 Nov 07 ZS Soybeans @ -15 1/2 - CLOSED - LOSS -29 1/2 which is 2.950 usd.
 
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