Seasonal spreads

Quote from runningman:
Can you recommend any books on Spread Trading? Also, when you enter spread orders on IB do you just buy one and sell the other, or do you enter it as 1 order to be executed at a certain spread value?
I'm a spread noob but I've been looking at Dec07 Wheat and July08 Wheat. The spread is huge. Any thoughts on it? I have no handle on how wide Wheat spreads have gotten historically.
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During the thread we've talked a bit about books on spreading. I'd like to point out Howard Abell's book called "Spread Trading". I think it's a very good book, although it's 10 years old now.

Using IB I create a Combo for the spread, when it's possible (calendar spreads). Then you can leave GTC limit orders for the spread.

Sometimes you have to leg in, when you want to do Corn vs Soybeans for instance.

Wheat seems to be normalising, I'm currently long May and short March wheat, but that's not part of this journal.
 
Today I opened a position I've been bidding for for over a week:

Long 1 Mar 08, Short 1 Jan 08 NG Natural Gasl @ -0.180

Other than that: Both the spreads in Crude Oil and Soybean Meal are not looking too hot, both are close to stoploss.
 
Hello hrokling

Thanks for sharing your trades. I took a look at this recent trade you made and just wanted to give some comments and also hopefully get some in return.

You have entered this trade on a seasonal, but I was wondering if you would have entered at -0.16, which is a 1-2-3- breakout? You mentioned you were bidding for this spread so maybe you were just weren't able to enter at a better price. If so, please ignore my question.

I also know that you may not be allowed to share MRCI information but looking at the width of the Bolinger Bands and the lack of volatility, it may be some time before the trade is to be exited? I should just read the Encyclopedia but its not in the office now.

Also, I wonder why you were entered at -0.18 because on bloomberg it shows that the spread closed at -0.172 on the 17th of October. I am not familiar with these contracts so I wonder what actually happened - if you could so kindly share.


 
Hello hrokling

I apologize for hijacking your thread - I am trying to follow your trades with charts and will now refer to your Long Dec 07 Short Jul 08 Soybean Meal trade.



Are these CBOT Soybean Meal futures contracts? If not, I know where the mistakes are in my chart.

Otherwise, what I would like to point out is the difference in price in the days of your entry.

I supposed you entered into this position twice, once on 14-Sep @ -5.03, and another on 02-Oct @ -4.40? Without discussing the average costs, I wonder why the spreads you entered are at such a different price from the ones I see on my bloomberg chart.

My charts are daily line charts using closing price, so this may be causing the discrepancy however, I'm surprised it is making such a big difference to trade intraday as compared to trading EOD.

Again, sorry for disrupting your posts.
 
Quote from lifegauge:
You have entered this trade on a seasonal, but I was wondering if you would have entered at -0.16, which is a 1-2-3- breakout? You mentioned you were bidding for this spread so maybe you were just weren't able to enter at a better price. If so, please ignore my question.

I also know that you may not be allowed to share MRCI information but looking at the width of the Bolinger Bands and the lack of volatility, it may be some time before the trade is to be exited? I should just read the Encyclopedia but its not in the office now.

Also, I wonder why you were entered at -0.18 because on bloomberg it shows that the spread closed at -0.172 on the 17th of October. I am not familiar with these contracts so I wonder what actually happened - if you could so kindly share.
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First of all: Sweet chart! Looks like Bloomberg?

My entry was a limit order on Globex, resting at -0.180 for a long time, and yesterday the intraday action was below that for a few minutes. So, it was a pretty good entry, in the hindsight of one day. I know a lot of spreaders enter MOC, but I prefer limit orders. Also, I entered long not short - I'm confused by the note on the chart? I am aware of the Joe Ross 1-2-3 entry method, but haven't really taken a look at it. I'm not totally convinced and unsure of it's merit.

Yes, the spread has been trading back and forth a lot in the last two months, between -0.170 and -0.135 has been the norm. Obviously one way to play it would be to wait for a breakout.

My horizon on this trade is end of November. I'm looking to add another contract, and am bidding for it at -0.200. If I'm not filled by mid next week, I'll start moving my bid up, probably around 0.010 per day.

I don't actually subscribe to MRCI's online service, I plan to, but so far I've got too much other things going on to be that serious about my spreads.
 
Quote from lifegauge:
I apologize for hijacking your thread - I am trying to follow your trades with charts and will now refer to your Long Dec 07 Short Jul 08 Soybean Meal trade.

Are these CBOT Soybean Meal futures contracts? If not, I know where the mistakes are in my chart.

Otherwise, what I would like to point out is the difference in price in the days of your entry.

I supposed you entered into this position twice, once on 14-Sep @ -5.03, and another on 02-Oct @ -4.40? Without discussing the average costs, I wonder why the spreads you entered are at such a different price from the ones I see on my bloomberg chart.

My charts are daily line charts using closing price, so this may be causing the discrepancy however, I'm surprised it is making such a big difference to trade intraday as compared to trading EOD.
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First of all: By all means, this is very on-topic - no apologies needed at all! I'm glad you take an interest. And yes, you've got the right contracts!

Here's a list of my entries in the current ZM-spread:
Sep 14: 1 @ -7.00
Sep 20: 1 @ -4.50
Sep 29: 1 @ -3.60
Oct 1: 1 @ -4.40
This makes the average 4 contracts at -4.875. Unfortunately I ended up buying 3 contracts at the intermediate top. Sometimes scaling in... well... The difference from the line-chart and my entries lie with the intraday action.

This spread does move a bit intraday - the range can be between 0.50 and 1.50 (the bid/ask spread can be 0.50, so it makes sense).

A long-term spread chart on closing prices does not give the full picture - although it gives you a clear and general idea of the move. I did spend a month on trial with Bloomberg this spring, and worked a bit on charting spreads like these. Unfortunately, it feels like Bloomberg takes a lifetime to master and I wasn't particularly successful - I think I managed to get a month of intraday spread charts, but I'm a candlestick kind of guy and couldn't get intraday candlestick charts on it. I don't use them, but know that SierraChart and Ensign can be used to create candlestick charts of intraday spreads.

Good luck and happy trading!
 
Quote from hrokling:

Today I opened a position I've been bidding for for over a week:

Long 1 Mar 08, Short 1 Jan 08 NG Natural Gasl @ -0.180

Other than that: Both the spreads in Crude Oil and Soybean Meal are not looking too hot, both are close to stoploss.
More...

Hello hrokling

Yes, that is a bloomberg chart. The spread on the chart is a Long Jan 08/Short March 08. Your trade was (the inverse) a Long March 08/Short Jan 08.

You are quoting your spreads correctly by specifying the Buy legs first, but I like to chart my near months first so it actually means the same thing, i.e. You are Long the Mar08/Jan08 spread which means you are Short the Jan08/Mar08 spread (my chart).

Sorry for the confusion!

Good trading.
 
Quote from hrokling:

First of all: By all means, this is very on-topic - no apologies needed at all! I'm glad you take an interest. And yes, you've got the right contracts!

Here's a list of my entries in the current ZM-spread:
Sep 14: 1 @ -7.00
Sep 20: 1 @ -4.50
Sep 29: 1 @ -3.60
Oct 1: 1 @ -4.40
This makes the average 4 contracts at -4.875. Unfortunately I ended up buying 3 contracts at the intermediate top. Sometimes scaling in... well... The difference from the line-chart and my entries lie with the intraday action.

This spread does move a bit intraday - the range can be between 0.50 and 1.50 (the bid/ask spread can be 0.50, so it makes sense).

A long-term spread chart on closing prices does not give the full picture - although it gives you a clear and general idea of the move. I did spend a month on trial with Bloomberg this spring, and worked a bit on charting spreads like these. Unfortunately, it feels like Bloomberg takes a lifetime to master and I wasn't particularly successful - I think I managed to get a month of intraday spread charts, but I'm a candlestick kind of guy and couldn't get intraday candlestick charts on it. I don't use them, but know that SierraChart and Ensign can be used to create candlestick charts of intraday spreads.

Good luck and happy trading!
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It isn't too difficult charting spreads in bloomberg with CIX <go>, but unless you were trading this full time and don't need it for anything else it wouldn't be worth the minimum $1.5k monthly fee.

Thanks for the clarification, on the intraday volatility.

Good trading to you too.
 
Quote from lifegauge:
Yes, that is a bloomberg chart. The spread on the chart is a Long Jan 08/Short March 08. Your trade was (the inverse) a Long March 08/Short Jan 08.

You are quoting your spreads correctly by specifying the Buy legs first, but I like to chart my near months first so it actually means the same thing, i.e. You are Long the Mar08/Jan08 spread which means you are Short the Jan08/Mar08 spread (my chart).
More...
Hm, this doesn't quite add up? Because the chart looks quite correct as a Long March/Short Jan - the opposite should be trading in positive territory. If I'm not totally mistaken - perhaps 4 odd hours of sleep last night is taking it's toll :)
 
Quote from lifegauge:
It isn't too difficult charting spreads in bloomberg with CIX <go>, but unless you were trading this full time and don't need it for anything else it wouldn't be worth the minimum $1.5k monthly fee.
More...
I actually think I was quoted around 1.8k GBP a month! Yes, I used CIX as well, but even the Bloomberg representatives couldn't help me create an intraday candlestick chart. I was mainly looking at it for news (which is totally excellent) and fundamental research/analysis.
 
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