You may use calender spreads to reduce your overnight margin, but the broker has to supported identify the spreads and the recommended margins by CME.

eg .If you are long 6S dec contract and want to hold it overnight, at the end of globex session, you may sell 6S mar contract to hedge your position...next day buy back the 6S mar contract to continue your long position....this way the margin required for overnight hold would be about 25% of the outright contract margin.

@SuperBliss

The margin required for an overnight contract is usually fixed as recommended by CME but day trading margins differ with each broker, as you would know.

The brokers who follow the CME margins for outrights and spreads are, to my knowledge, IB, advantage futures, vision financial.
Other brokers like AMP, Mirus, velocity etc have very less day trading margins for most outright but till now they were not offering spreads and relevent margins.
I have a live account with AMP and AMP has recently offered x-trader for trading on transactional basis and that includes spreads on CME, Eurex and ICE....I guess other brokers would also follow. I have confirmed with AMP that they recognise margin credit for a spread trade and can be held overnight at the margin recommended by CME.

In your example, we have following contracts on 6S with dec and march volumes in the pic.

6S outright contract requires > $2000 as margin however the calender spread requires just $130 for holding it overnight.
Check the pics in attachments.

So its best to inquire with the broker about margins but now x-trader available on transactional basis with spread margins would be a great offer.

This is certainly an option, but keep in mind:

1. The distant contract will likely have a wider spread. Right now, for example, the March 6S spread is double the Dec 6S spread. And now is probably a good time, since many people are rolling from Dec to Mar. So, count on extra spread costs.

2. These instruments do not always move in tandem, and can actually move opposite each other. This is not so bad with currencies, but with ags it is a big deal. You can probably count on losing a bit here.


The bottom line is that in the long run it is much cheaper, and much more efficient, to combine all strategies in one account, and just trade the net position. The drawback is figuring out the logic. I know it can be done, though - I have done on a small scale (<5 systems). And, I know of one CTA who combines 20 systems, and a hedge funs that combines 30 systems, all into one master account.

Some brokers have master accounts and sub-accounts. Margin is calculated at the master account level, so in your example (Short 5, Long 6) you would only be margined on the Long 1 position. I don't have a list of which brokers do this but it may be something you want to investigate/consider if margin is that tight.

Thanks kevinkdog,

I appreciate the great info. Its inspired me to start working out how I can use that method myself.

I completely understand the concept of just trading the net position but since this is not the way I have been trading I was wondering if you could give a relatively simple real-life (not necessarily a real position you are in) example of how the master account would behave when trading just two or three positions at once. It might help me break my brain lock that is preventing me from getting to a starting point on envisioning how this process works specific to my needs.

Thanks Again,
Bryan

Thanks for the feedback.

I will definitely look into other brokers. So far the two I have asked have told me that its not possible.

Also, as far as being long and short at the same time i agree there are some drawbacks when considering book keeping.

For me, the advantage of being long / short the same time is how this method effects me emotionally / psychologically. I feel like I have more time to think, prepare, strategize, etc about the market and the price action than if i'm trading uni-directionally.

Also, i feel like there are opportunities that arise from being long / short at the same time that are less difficult to find compared to trading uni directionally.

I refer to those opportunities as useful-risk opportunities. To me useful-risk opportunities can be described, for example, as when one trade's loss overlaps with another trade's gain.

Most importantly, I'm very curious as to what others are experiencing with their trading.

Do you mind if I ask what psychological advantages / disadvantages you experiencing with your trading at the time?

If you are saying that at certain times your individual strategies could be in opposite directions, then your best approach would be to use the "sub" account approach and monitor each independently.

If you are long and short because it is easier for you "emotionally / psychologically" than just being Flat, you probably should reevaluate your trading methodology. Being Long and Short the same market in the same month is the same thing as being out, except that instead of having no positions to manage, you have two to manage (and mess up).

I agree with @Jvvv, if you are long 1 and short 1 of the same instrument / same month, then technically you are flat, whether you are using one account or two. I used to spread trade so I appreciate the nuances of being long one instrument and short another, but the same instrument? I can't understand how this can provide any opportunity or risk at all? Eventually, to profit, you will have to close one of the positions which is the same as putting the opposite position on.... so why not just do that? I don't intend to be negative here just confused because everything I've learned about trading tells me this doesn't make sense. Can you site an example of how you can profit from this strategy?

It only makes sense from a bookkeeping sense. It will cost you more commission, extra slippage, and carrying costs. Even after all this, some people think it is still worthwhile.

Only one situation I know does it make sense, and it is with stocks.

Let's say there is upcoming announcement, and you want to be short. But you know if you wait until near the announcement, no stock will be available to short. So, today you buy the stock, and also short it. Then, when the announcement comes, you simply sell your long stock, leaving you net short.