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anyone scalping the NOB futures spread
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anyone scalping the NOB futures spread

  #21 (permalink)
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PK 1 View Post
@josh

here the paper, on the given link in my previous posting one can reach a few other very interesting documents regarding the topic
CME-Paper

Of course ZB and NOB are quite different, but in another post Fat Tails was thinking why not ZB directly when in his chart spread moved almost like ZB itself, so here were my two cents for this. Even checking this on the log term I could see the same strong correlation. Especially the lower margin is the biggest advantage. In case of the ICS the transaction is guaranteed by CME not the broker, legging in manually the user has to pay the risk. Hence the question whether the software one is using also supports ICS-Symbols like NOB for example. AFAIK Tradestation and likely Autospreader can chart it.

If that is true, can you post a chart showing this? I didn't think Tradestation could chart the exchange quoted spread, so if it does, I have been mistaken for quite a while.

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  #22 (permalink)
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PK 1 View Post
Thx for the info, but what you mean is just the calculation of the spread not the NOB itself? For the calculation of the spread and other stuff I have done in Multicharts already, but seek for a possibility to trade it directly from the software. I've read some posts from s0mmi and some other user here regarding spreads, very valuable!

I meant that the NOB uses a 2:1 ZN:ZB ratio, so to size up you would do 4:2, 6:3, 8:4 etc. To trade the spread without manually legging you would need an autospreader, as far as I know the only retail solutions that let you do custom spreads are CQG and TT.

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  #23 (permalink)
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I traded the FIT and NOB for more than 10 years. I had TT and used Auto Spreader and legged the spread as well. I primarily traded the spreads from 2 pm to 4 pm CT and during the Asian and European market hours. I had a excel spread sheet that calculated the spread levels. For me, I rarely looked at charts....mostly a mean reversion strategy. Towards the end I did begin to look at charts. Whoever you have charts with should be able to help you.

QE and HFT's really changed the trade and it was time for me to make a change. I had probably over 100 guys I knew that traded these spreads and there are just a few left. I had several friends that were 7 figure curve traders and are no longer trading....

Anyway, the exchange does have an 'implied spread' market that executes the trade for you. The levels on the implied mkt are based on the prior days 2 pm CST settlement. The ratio for the NOB is 2 to 1 and the ratio for the Fit is 3 to 2. This implied mkt is actually quite effective in busy mkts....it removes the execution risk. I utilized this 'implied mkt' quite a bit late in my curve trading career and it was a big help (no competing with HFT's).

An example of the implied price for the NoB spread... tonight bonds are up 4 ticks...hence ZN should be up 2 ticks. If ZN is up 3 ticks then the NOB would be 1 tick strong. This is how the Chicago local looks at it.

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  #24 (permalink)
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PK 1 View Post
Of course ZB and NOB are quite different, but in another post Fat Tails was thinking why not ZB directly when in his chart spread moved almost like ZB itself, so here were my two cents for this. Even checking this on the log term I could see the same strong correlation. Especially the lower margin is the biggest advantage. In case of the ICS the transaction is guaranteed by CME not the broker, legging in manually the user has to pay the risk. Hence the question whether the software one is using also supports ICS-Symbols like NOB for example. AFAIK Tradestation and likely Autospreader can chart it.

I'll reiterate--it's a totally different trade. The NOB or any other spread removes the directional component of the underlying instrument. Along with the advantage of a lower total margin for the spread, if you can get it, you also will get paid less on average than an outright winner, per dollar of margin (I did not do the math but encourage you to do it for yourself if you choose). There is no free lunch, and with a spread you remove directional risk but also remove directional reward.

So just to be clear--trading the NOB allows you to trade how two points move in relation to each other along the yield curve (or more, for different spreads); trading the note or bond by itself allows you to trade how one point moves by itself along the yield curve. It's that simple.

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  #25 (permalink)
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@josh I completely agree. As I said the point was why the correlation as seen on the one chart, even if there shouldn't be such a correlation. I've checked twice now on my charts and after setting the current Leg-Quantity-Ratio as suggested by CME (see my links for that) 2:1 it's way better looking, without that big correlation.

Regarding the math: In the last weeks on Multicharts I was developing my indicators regarding spreading, mainly ES-YM but due to the prob of legging into I toke notice of the native spreads. The risk/reward is part of my indicators but I still need to check useful ideas which really help when investigating my spread-charts and while trading it. At the moment it looks like I should move my dev to to MC.Net or directly develping my indicators and likely a GUI for my spreading on NT7. Autospreader would be great but to expensive on a monthly base and AMP + Autospreader on a transactional base ... I'm not sure about it

@tflanner Thanx for your posting!


Last edited by PK 1; February 11th, 2014 at 10:30 AM.
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  #26 (permalink)
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thanks

thanks for your thoughts

alejo

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  #27 (permalink)
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You need to use the leg ratios specified by the exchange to benefit from the generous margin relief for the spread.

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  #28 (permalink)
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Fat Tails View Post
The spread seems to follow the price moves of ZB or ZN, as ZB is more volatilite than ZN. It should be simpler to trade ZB. Or is there anything that I did not get?

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why should be easier to trade zb than zn because the higher volatility?
thanks

alejo

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  #29 (permalink)
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alejo View Post
why should be easier to trade zb than zn because the higher volatility?
thanks

alejo

My idea was that it should be easier to trade ZB than the spread. I did not compare trading ZB versus ZN.

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  #30 (permalink)
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easier instr



Fat Tails View Post
My idea was that it should be easier to trade ZB than the spread. I did not compare trading ZB versus ZN.

my question is regarding why is easier the high volatility instrument of both.
thanks for your help

alejo

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