Spread Trading - an easier way to trade!

[dunleggin]

Quote from Joe Ross:

Since ED is more closely tied to the T-Bill rate, FED actions affect Eurodollars more than the longer term contracts.

JR [/B]

??? The ED/T-Bill relationship is a credit spread. And the 'Green' EDs, for example, have strong relationships to the 5yr Note and 5yr swaps market.

Generally, there is no analytical relationship between changes in a specific yield spread and changes in the general level of interest rates.

The market leads the Fed. Why is there a reason to avoid the Fed's influence? Arguably, the presence of other factors in the 10yr sector, such as foreign CB buying and mortgage desk hedging, make assessments of shifts more difficult.

 

[dunleggin]

Quote from Joe Ross:

The only place I can think of is the Chicago Board of Trade.
They are the ones who deal the most in interest rates and interest rate futures.

Yes, CME doesn't really count .....after all, what's a few eurodollar contracts a day...

 

[dunleggin]

Quote from BlueHorseshoe:

On a strategy for rising interest rates:

First, I be selling GBL calls for income. Second, sell the ED spreads as the core long-term position. Third, scalp ZB/ZN intra-day and overnight, going both long and short on extreme moves.

I think pursuing this kind of position would make for a good journal over the next ~2 years, but doubt I have the time to keep it up.

**Throw in some short JGBs on Simex for diversification. Have to find where JGBs trade electronically ...

''Sell the ED spreads as...long-term position'' - Really? Even if they happen to be sitting at the cheap sigma? Spreads require constant evaluation. Trend they might, but that doesn't make it a buy and hold game.

''Scalp ZB/ZN intra-day and overnight'' - Your enthusiasm at EDs becoming increasingly electronic should perhaps be tempered by the fact that this is also attractive to the big players with their TT machines and new Navigator software, multivariate-driven algorithms, etc. This will not be a profitable space for anything other than highly focused, well-equipped fulltime traders

JGBs....advise you not to go there. That is not an 'honest' market and the contract is an expensive one on which to make mistakes

'Selling ..calls for income' - naked?

Yes, this would make for a good journal. I hope the reason that you can't find time for the journal is 'cos you'll be fully devoted to managing all these positions

 

[privateisland]

Yeah, one of my most successful trades when I was starting out was a spread trade. The only problem was it took around 3 months to pan out accordingly. But I did make like 5k on that trade. Ahhh, the good old days of EOD trading

 

[sunnyskies]

Joe Ross is a troll.

 

[BlueHorseshoe]

Quote from dunleggin:

''Sell the ED spreads as...long-term position'' - Really? Even if they happen to be sitting at the cheap sigma? Spreads require constant evaluation. Trend they might, but that doesn't make it a buy and hold game.

''Scalp ZB/ZN intra-day and overnight'' - Your enthusiasm at EDs becoming increasingly electronic should perhaps be tempered by the fact that this is also attractive to the big players with their TT machines and new Navigator software, multivariate-driven algorithms, etc. This will not be a profitable space for anything other than highly focused, well-equipped fulltime traders

JGBs....advise you not to go there. That is not an 'honest' market and the contract is an expensive one on which to make mistakes

'Selling ..calls for income' - naked?

Yes, this would make for a good journal. I hope the reason that you can't find time for the journal is 'cos you'll be fully devoted to managing all these positions

Dun - the depth of your cluelessness is frightening. Welcome to my ignore list.

 

[dunleggin]

Them's that can, do - them's that can't, ask Joe Ross

 

[Vixpills]

does the margin required fluctuate on a time spread (i.e. variation margin) or is it insensitive to the underlying price movements.

 

[Joe Ross]

Spread margins are computed by the exchange in much the same way as Span margins are computed for options. Margins for spreads are primarily a function of the volatility of the underlying. Therefore, if the underlying futures become increasingly volatile, spread margins will rise. And if the underlying futures become less volatile, spread margins will fall.

Hope this helps.

JR

 

[Vixpills]

Thank you for your answer Joe

I am particularly interested by spread trading the Vix futures
CFE stipulated that initial margin is 50$ and maiantenance 40$ on spreads.
Now I have been analysing those spreads since May and aspread can vary from 5pts to 20pts in one week, resulting on a profit or a loss ( depending of which side your playing) of 1,500$.
Now how can a margin of 50$ be enough to cover for a possible loss of 1,500$ in one week. Note that since May the margin requirements on spreads stayed the same. Am I missing something here. Maybe it is that if a incure a paper loss of 1,500$ i will have to add 1,500$ in my account ( variation margin). Or is the concept of variation margin different for spreads than for a naked futures positions?