Joe Ross Trading Seminar & Course

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Spread Trading

Hi

Is/has anyone around here profitably spread traded before? Or are you spread trading still? Note this is NOT the same as the ubiquitous spreadbetting.

Look at this link http://www.futures-spread-trading.com/why.htm

A while ago I was looking 4 work with proprietary futures daytrading firms and without exception, ALL these firms were involved in spread and butterfly trading of interest rate futures etc.

Given these facts why are the 'herd' not generally taught spread trading etc and to use interest rate futures? We're sent, like lambs to the slaugther, to buy options, futures, margined CFDs and stocks and the now wonderful SBetting!

This is all very dodgy!

 

[Rognvald]

Seguna
No -its up to you what and if you trade - one of the first things I did when thinking about trading was to make a list of the types of
"instruments" I could trade.
Some I did not understand and those I stayed away from. All have their advantages and disadvantages - it depends on what you are trying to achieve and what you feel comfortable with and what risk capital you have.
I haven't spread tradedf because I don't feel I know enough about it or at present am sufficiently interested - on the other hand I have spread betted Indices.

Maybe you need to do some more research.

 

[CityTrader]

Re: Joe Ross Trading Seminar

I’ve just attended a seminar run by Joe Ross on Day Trading Futures and Spread Trading Futures


What was interesting was that you only do one winning trade a day. Yes just one.
Take care,

Funnily enough i was just editing my trading spreadsheet for my accountant, and realised in the 8 months I've been working for myself, I've done a total of 320 trades- 159 round trips ( excluding my 2 current open positions) roughly 1 round trip a day.

And as for the comment about market makers being nice people- thoroughly agree ( having been a market maker for the last 18 years!) with a few infamous exceptions.

 

[CityTrader]

Re: Trading Books

Hi Folks.

Have you ever bought a trading book from AMAZON.COM as opposed to AMAZON.CO.UK? I'd like to use .COM coz the prices are much less including postage.

Try Borders ( certainly the Watford branch) they have a huge range of trading books. Of course, from the sounds of it, you may not like their prices...

 

[Andreas]

Re: Spread Trading

Hi

Is/has anyone around here profitably spread traded before? Or are you spread trading still? Note this is NOT the same as the ubiquitous spreadbetting.

Seguna,

I have been trading spreads now for a few years, and I found it a good way to consistently make money in the markets. I am trading mainly grains and livestock, sometimes softs (cocoa, sugar) and ED spreads.
You will not hear me say that spread trading is for everybody. So many traders, so many trading styles. I tried a lot, from day trading to options writing, but found that trading spreads works for me. Others find it boring, just as I find day trading too hectic. But that is purely personal.

Why don't we hear so much about it ? Well it is a bit of a specialist field, which does by no means mean it is difficult to learn. As you mentioned earlier, all the big firms trade spreads, sometimes to hedge a certain position. Apart from trading spreads, they are also worthwhile to look at as a longer term indicator when trading the outright futures. Spreads can be a good barometer of the general longer term direction of a market.

I wish you good luck with your trading,
Best regards,

Andreas

 

[fillyerboots]

Spread trading is probably the largest activity for professional traders in London Markets.

The Euribor (Euro short term interest rate)contract on Liffe is probably second only to Eurodollar as the largest Futures contract in the world trading some 108 million contracts by Q3 his year. I'd say half of this volume are intermonth spreads played out all along the yield curve e.g z/h, h/m , m/u etc... I know ex Liffe pit traders trading 1000s of contracts per day in this market.

Liffe's post open out cry success has been largely down to this contract and the amount of spread-trading it has.

One benefit is the ability to use touching spreads i.e. trading m/u if you have a h/m position to help trade out of your position more profitably.

Downside is extra commission because of the doubling up as you are always doing twice the number of contracts if you trade spreads.

 

[FTSE Beater]

Downside is extra commission because of the doubling up as you are always doing twice the number of contracts if you trade spreads.

Hi Fillyerboots

True, but you also get reduced margin on those trades

 

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Spread Trading

Thanks all for your comments. Much appreciated. I fairly new to forums and BBs etc though not to trading or computing.

May you find blessing and fulfillment in your trading.

 

[dant]

Fillyerboots,

Could you recommend any sites or books to give an overview on interest rate futures and spreading these?

Thanks.

 

[fillyerboots]

Hi Dant,

No specific books but try Liffe and CME wbsites www.liffe.com and www.cme.com for information on Interest Rate products. The Eurodollar has just begun running on the CME's electronic platform in tandem with the main pit-traded session. It remains to be seen whether the electronic market wins that battle, my guess is it will.

The spreads are just like any other instrument but tend to trend better than the individual legs.

Beware the diference between European and US Spreads though.

In Europe we quote the near month first. e.g. March/June spread.

In the US they quote the far month first e.g. June/March !

 

[johnk49]

Joe Ross

This is my first posting on any kind of forum so I dont even know if I'm doing it right!! Anyway,I have been a follower of Joe Ross for a long time and I have all of his books they sell for around £100 at Amazon.If anyone is interested they can buy 3 of these books for £100+P+p.The books are"Electronic Trading TNT 1 2 3" nearly a 1000 pages of great stuff,which I have read over and over and now know by memory.Let me know if your interested.BTW they are in excellent condition.

 

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Spread Trading

Hi All

Can someone please provide a thorough explanation of WHY and spread trading works or doesn't work? When I buy, I want a price to rise, when I short I want the reverse. With spreads it appears I'm doing both at the same time. To me this is doubling the risk as both posns could go wrong yet spreads are supposed to be conservative? What does each 'leg' have to do to result in profit and how do spreads automatically 'limit' downside such that stops are not needed?

Please oh please bring clarity to this fragile mind!

 

[Trader333]

Basically the theory is as follows:

You have 2 instruments one is very over bought compared to historical norms and therefore has a high liklihood of going down in price. The second is the opposite in that is very over sold and likley to go up in value. Assuming that this is correct then you have the following possible scenarios:

1) Both move up in value
2) Both move down in value
3) Both dont move at all (very unlikley)
4) The overbought moves down in value and the oversold moves up in value
5) The overbought goes up in value and the oversold goes down in value.

So in scenarios 1 to 4 you wouldnt lose any money therefore reducing risk but this all depends on how you go about measuring over bought and oversold instruments.

There are variations to this in that you could buy a strongly upward moving instrument and sell a strongly downward moving instrument based on momentum.

In my view it doesnt work as well on momentum stocks as it does on others because momentum stocks tend to fizzle out more quickly than slower moving stocks.

There are also buying two different timed futues contracts such as say March and June but I dont know too much about these.

I am sure others will have views on this as well but the principle is as described.


Paul

 

[FTSE Beater]

Hi Seguna

Some spreads trades work on seasonal events that repeat themselves year in, year out.

For example, a few months ago it would have been great to go Long Dec Turkeys and Short Mar Turkeys - why?
Well with Christmas coming up, the demand for turkeys increases but there is no point in the manufactures buying Mar turkeys because it's too late then and Christmas has gone.

There is no guarantee that Dec turkeys will raise in value, as it might be that the whole turkey market is falling. What you do know is that their will be more demand for Dec than Mar.

This is only a basic example, but I hope that explains the underlying mechanicals behind it

Remember, that in the above example. Mar turkeys might rise while in the trade, but as long as the Dec turkey increase more in value then you are in profit

 

[Goober]

The long and short of turkey spread

FTSE Beater

Short March turkeys would probably roast better than long December turkeys although long December turkeys have more meat. However, short March turkeys aren't available until after Christmas therefore long December turkeys are the only option at present. Why not try turkey spread, which is great on toast?

What a load of turkey gobble! :cheesy:

Goober

 

[sandpiper]

Re: Spread Trading

Hi All

Can someone please provide a thorough explanation of WHY and spread trading works or doesn't work? When I buy, I want a price to rise, when I short I want the reverse. With spreads it appears I'm doing both at the same time. To me this is doubling the risk as both posns could go wrong yet spreads are supposed to be conservative? What does each 'leg' have to do to result in profit and how do spreads automatically 'limit' downside such that stops are not needed?

Please oh please bring clarity to this fragile mind!

seguna,

It's a huge subject and therefore impossible to give a "thorough" explanation of the whys and wherefores via a medium like this.

The best book I have on the subject is "The Futures Game - Who Wins, Who Loses, & Why" by Richard J. Teweles and Frank J. Jones.

It's a no nonsense, factual description of the various types of spread, inter-exchange, inter-commodity, calander, etc. It's also describes all other futures, options on futures related products.

It doesn't cover trading strategies in the same way that a book such as Joe Ross's does. But I can recommend it nevertheless.

You should be able to pick it up from Amazon for 20-25 quid.

hth.

 

[FTSE Beater]

LOL Goober

 

[DaxTrader]

Interest Rate spreads

I don't know much about this, but have a good friend who trades Eurobor Shatz, one of the most common spreads.

He traded in an office in London with loads of others doing the same thing. Seems a few made a lot of money but otherwise a living over all was being made, with people dropping out as well.

But, the otherside to it is it seems that once in a while you will take a large loss after lots of small profits.

He told me recently that a friend who has been there for 5 yrs and done very well lost everything he had made when the spread he traded blew out. Back to square one.

 

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Spread Trading

Paul

Thanks for this - excellent clarity. Fragile mind continues to gain...

FtseB

Thanks for further input

Goobie

Thanks 4 making me laugh well today. Hasn't been 2 great a day...so far

Piper

Tx 4 the recd

DaxTr

Did this guy do something really silly like take a huge gamble? Surely it is not the norm with spreads that one trade should wipe you out? I suspect the issue is with that particular traders risk control and not spreads as a trading technique.

Any comments on this from the more experienced please?

 

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Spread Trading

I'm starting to understand buying two different contracts to achieve a spread trade. But what is behind actual so called spread contracts e.g. the Schatz which relates to Short Term Int Rates? Thes 'spread contracts' actually have their own symbols and charts!?!

Fragility beckons....