Spread trading with Rithmic

[BAT31]

Interactive Brokers can handle spreads. In fact, they provide access to exchange-traded spreads. However, there is one goofy quirk-- they list spreads backwards.

For example, a normal spread is considered NGK4-NGZ3. And a reverse calendar spread is NGK3-NGZ4.

It's a little confusing at first. One just needs to remember that if you want to open a position based on the front month, you need to put on a reverse calendar spread.

 

[DanB65]

It looks like there are 2 issues here and 1 item to consider.

1. If you have auto-liquidation enabled, and a bad tick is put out by the exchange that triggers the liquidation criteria, Rithmic will submit a liquidating order. That is not a fault of Rithmic. Some of the contracts you are trading are pretty thin. NGZ4 has a volume of 420 on Globex. Overnight the book will get pretty sparse. People will toss out BS bid/asks and that can screw with auto-liquidation.

2. You say you did not have on the spread that was liquidated. That will likely be a function of how your SOD positions are managed by your FCM and therefore sent to Rithmic. I would ask the FCM to confirm what was sent.

The consideration. Either you, your IB, or the FCM requested auto-liquidation be turned on. If you move to another system and you want auto-liquidation, it may not have it. For example CQG does not have native auto-liquidation. There is a vendor they work with but it is very expensive and most FCMs don't use it.

 

[hilmy83]

Hello,

Anyone trade with Rithmic? Last Monday, they messed up my spread positions again blaming a 'bad tick' happened (again!). I had multiple simple /NG calendar spread positions (NGK3-NGM3, NGX3-NGZ3, NGX4-NGZ4 and QGH3-QGJ3) holding for weeks and it looks Rithmic doesn't have ability to handle this. They say a bad tick issue liquidated NGK3-NGZ4 position which I never had. Should I move to CQG or TT?

Thanks

More important question is how is spread trading going for you? As far as consistency/return.

I figure this can easily be automated

 

[heispark]

Interactive Brokers can handle spreads. In fact, they provide access to exchange-traded spreads. However, there is one goofy quirk-- they list spreads backwards.

For example, a normal spread is considered NGK4-NGZ3. And a reverse calendar spread is NGK3-NGZ4.

It's a little confusing at first. One just needs to remember that if you want to open a position based on the front month, you need to put on a reverse calendar spread.

As far as I know, they don't respect SPAN margin of spread trading just like TD Ameritrade.

 

[heispark]

It looks like there are 2 issues here and 1 item to consider.

1. If you have auto-liquidation enabled, and a bad tick is put out by the exchange that triggers the liquidation criteria, Rithmic will submit a liquidating order. That is not a fault of Rithmic. Some of the contracts you are trading are pretty thin. NGZ4 has a volume of 420 on Globex. Overnight the book will get pretty sparse. People will toss out BS bid/asks and that can screw with auto-liquidation.

2. You say you did not have on the spread that was liquidated. That will likely be a function of how your SOD positions are managed by your FCM and therefore sent to Rithmic. I would ask the FCM to confirm what was sent.

The consideration. Either you, your IB, or the FCM requested auto-liquidation be turned on. If you move to another system and you want auto-liquidation, it may not have it. For example CQG does not have native auto-liquidation. There is a vendor they work with but it is very expensive and most FCMs don't use it.

Thank you very much for your feedback and detailed information. I will check this with my broker..... It really helps.
Thanks,

 

[heispark]

More important question is how is spread trading going for you? As far as consistency/return.

I figure this can easily be automated

In this winter, nat gas marked the highest volatility in 30 years but I am still comfortably trading nat gas spreads. Yes, I currently have some minor pending loss but I expect it will be recovered sooner or later. I have had only one major loss when I played a gambling with notorious 'widow maker spread' which is March-April spread. Other than that, I really love spread trading. Actually, this is the only strategy for me has survived for 3 years. What I like the most however is, unlike day trading, it requires very minimum time spending for me. I think I can easily make 50% gain per year without sacrificing my personal life. Leverage is important here too. There are people who easily make triple digit % gains for some time but they would eventually blow their account because of over-leveraging. Although personally I don't know much about automation, I don't think you really need automation for spread trading as it already requires very minimum time spending.
Thanks

 

[hilmy83]

In this winter, nat gas marked the highest volatility in 30 years but I am still comfortably trading nat gas spreads. Yes, I currently have some minor pending loss but I expect it will be recovered sooner or later. I have had only one major loss when I played a gambling with notorious 'widow maker spread' which is March-April spread. Other than that, I really love spread trading. Actually, this is the only strategy for me has survived for 3 years. What I like the most however is, unlike day trading, it requires very minimum time spending for me. I think I can easily make 50% gain per year without sacrificing my personal life. Leverage is important here too. There are people who easily make triple digit % gains for some time but they would eventually blow their account because of over-leveraging. Although personally I don't know much about automation, I don't think you really need automation for spread trading as it already requires very minimum time spending.
Thanks

That's interesting. I'm pretty much at the same spot too. Just aiming for like 40-50% annual gains but with full automation. I'm resigning to the possibility this is the best I can do and focus more on other things in life like my career or other business ideas.

 

[BAT31]

As far as I know, they don't respect SPAN margin of spread trading just like TD Ameritrade.

That is certainly not true. IB offsets margins on spreads, as indicated below:

 

[abc1234]

The exchange listed maintenance requirement on that H3-K3 spread is 900. Outright maint. req. for CLH3 is 6,600.

Personally, I like to keep my margin level in the 25-40% range of Total Equity. If my broker was charging 3x the exchange SPAN margin I would not be able to do that.

 

[BAT31]

It is rare to find a broker that offers the exchange-recommended maintenance margins. Most will offer a multiple of that.

At least IB offers some margin relief. Whereas some offer none. Besides, I go with IB because I can create trading algos using Python.

Besides, you can always ask the broker for a reduction in margin. Then again, that would depend on your account size.