Legging Into Spreads

[clbfjc]

Hi All,

just been made redundant and looking to use some of my money to trade. I used to trade at a prop firm years ago, mainly fixed income outrights bund / bobl / Schatz and eurostoxx. Interested in spreading and in particular how you would leg rather than use an autospreader. Looking at bund bobl. Can anyone advise which leg you would look to get on first and of this is common practice now or is an autospreader the way to go?

 

[Windlesham1]

sometimes I trade a 'half portion' of a spread, and if it gets a better price later, sell/buy the other half.
Legging in is a personal thing-safer to buy the longs first of course

 

[clbfjc]

What is the logic behind legging into the long side first?

 

[OptionParty]

On entry, buying the longs first, keeps you from a naked position.
On exit, buy the shorts first, also reduces naked exposure.
Rule: Buy first on entry and exits.

 

[lloydbee]

safer to buy the longs first of course

Plus saves HUGE margins that would be required if you STO first.

Rule: Buy first on entry and exits.

Nice rule OP, makes a lot of sense.

 

[clbfjc]

Hi Guys, Thanks, are you guys coming from an option spreaders point of view? I am coming from more along the lines of futures specifically fixed income, so Bund / Bobl or Ten Year vs 5 year Notes as examples

 

[lloydbee]

Hi Guys, Thanks, are you guys coming from an option spreaders point of view?

+1 options for me

 

[SpreadDoctor]

Hi Guys, Thanks, are you guys coming from an option spreaders point of view? I am coming from more along the lines of futures specifically fixed income, so Bund / Bobl or Ten Year vs 5 year Notes as examples

I think they are talking about options. I know some prop people who trade it. They don't use the autospreader any more as it stopped getting good fills a few years ago. I think certain algos targeted it. Of late I believe the spread has been led by the bund. In terms of legging in I believe most will be leaning on key levels to get a 'good' fill at the spread price they are looking for. So they will have orders in the book ahead of time. The bund is obv more volatile so there is more play in it so I would look to get a fill in the bund first. You will also need to watch the US 10s alongside bund/bobl for obv reasons. GLGT.

 

[clbfjc]

Thank you. Thats perfect, I am guessing same aplies to BobL / Schatz ie try and leg into the Bobl first and then get into the schatz leg

 

[SpreadDoctor]

Thank you. Thats perfect, I am guessing same aplies to BobL / Schatz ie try and leg into the Bobl first and then get into the schatz leg

well i guess if you wanted to do that. but trading a 2s5s spread is going to be like watching paint dry . I am sure the guys who trade the fly use the autospreader in TT. You mentioned you used to trade prop. I believe you will need prop trading rates if you are looking to take a few ticks out of the spread. i.e. sub 1 euro round turns. If you end up paying 3 euro round trips you will get raped in costs. Of course this does not apply if you holding your trades. GLGT.

 

[clbfjc]

I used to trade the usual Bund Bobl Schatz as outrights, however those who spread seem to still be in the game. I was over at Marex, also been looking at Binaries with some time decay strategies, just trying to work out what will work best for me, also not sure the 1 - 2 tick scalping / market making is really a viable strategy???