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It is difficult to say what is a "fair price". I do not follow the fundamentals for orange juice.
In case the spread follows the seasonal chart, it would be a good idea to enter right now. A Short time ago, it was cheaper. But I am not sure that the price will get back there.
Thanks for the feedback, usually when you decide is the time to exit the trade? I had a small account dedicated to seasonals this year and did not got in gain yet but manage to not have a big loss either, -8% I put as a rule to keep the position till the end of the seasonality...But got a lot of reverse trend this summer, I guess due to China buying everything and so I got a lot of stop losses... Any suggestions about this?
Currently, I take profits on the way upwards. I begin with a profit that has been made in almost all years. And end up with a profit that looks a bit optimistic. And sell my 10 or 20 or 30 spreads on the way. (There is a type of order in the IB software which allows for doing this easily.) On a severe drawback or at the end of the seasonal window I close the position.
My main knowledge of spreads is the yield curve spread as the NOB, TUT, FOB, etc and commodity calendar spread and crack spread in Oil. I have never traded them as was under the impression the margin and the cost of trade is high. For example, NOB you need to buy 3 ZN and sell one ZB. And hold it beyond intraday means also maintenance margin.
This thread is an eye opener as it might change my view and build an interest in seasonal or intraday. I read in the first chapter of Joe Ross book that the margin and cost is lower than normal but my experience that my broker never knew what I am talking about. Also not sure if there is a platform to enter a recognized exchange spread and I would pay it as an instrument with its own margin and commission combined rather than legging in spread.
Is there any material to read to get in sync with the thread and evaluate if it would be suitable for any of potential strategies.
Spread margin for futures showing a good correlation and traded at the same exchange is usually significantly lower. This is even more true for calendar spreads for one commodity.
Jery Toepke rom MRCI has written a book long time ago, but it cannot be found on their internet-site anymore,
MRCI offers a subscription service regarding spread trading: "Jerry's Weekly Spread Commentary". A free trial for 2 weeks is available.
Thanks a lot @myrrdin - Is there any numerical examples-- I am using Sierra Chart and assume that I enter a spread on NG or CL on front and bank month.
Will the broker recognize it as a spread or the exchange ? Actual numbers might help to understand as my broker support team doesn't know it.
Or should I use a specific broker or platform that will automatically provide different spreads and make the reduced margin.
How long is these trades ? Is it long term for a month or quarter or is it intra-day ?
My background that the treasuries spread can be traded intra-day as all institutional traders execute it . Is it intra-day style on your side?
I have seen also another platform or service called seasonalgo .. which one is better MRCI or this one ? or what are you guys using? I hope to see some tutorials on the web but it seems an overlooked topic. Any more info is appreciated.
Almost all brokers I worked with in the past used SPAN margin. This includes low margins for spreads. The only broker not using SPAN margin is Interactive Brokers, but used low margin for spreads, too.
It is hard to give you an example, as I hold positions in almost all commodities. Thus, margin of an additional position in my account is influenced by the existing positions. Spread margin depends a lot on the commodity. In the metals, spread margin is very low (compared to the margin for the outright), whereas in the meat markets it is very high. Grains and energies are somewhere in the middle. And of course spread margins depend a lot on the time between the expirations of the two futures. CLH-CLZ takes more margin than CLH-CLJ.
If you want to trade spreads and your broker does not even know about them, I would look for another broker. Probably their software does not allow entering a spread in one order.
I do not trade intra-day. I prefer holding my positions for weeks or months.
I prefer MRCI, but I know others who prefer Seasonalgo. MRCI offers not only seasonal charts for futures, but in addition seasonal charts for volatilities, a very nice add-on for option traders.
Please do not hesitate to ask, if you have further questions.
Thanks a lot @myrrdin for the prompt response and details.
I am using AMP for futures ? I have also IB who charges a lot for Futures margin. I will double check again with AMP trade desk about how they recognize a spread as I enter my trades from Sierra Chart and there is no symbol at CQG for commodities or treasuries spread.
I assume that I will need to leg into the spread construction and somehow their trade desk can recognize it as a spread. Assume I entered a trade of front month at the day start and by end of the day I legged into a spread then they should match it as a spread margin. I will check with their trade desk specialist to get their feedback.
In your opinion how large an account to trade seasonal spreads across all commodities as you do ? How much of cash or free margin cash to accomodate the additional trade unrealized profits ? For sure this would be a tough estimate but any input can provide me a figure of it.
Is it better to spread in options on Futures or use all the time the futures.. I assume futures is better as options has a time decay theta built in it ?
How Average seasonal trade time could be a month a quarter a harvest season ...a withdrawal of storage like NG period from October to March ..etc ..also average numbers to provide a taste of the style.
Any recommended broker or platform ? I assume that MRCI and seasonal algo are the services that call trades but not trading brokerage.
What is the average expected profit or loss for a common spread ? I mean one unit of spread ..are it depends on market but for instance energy average ..metal ...grains..treasuries
Is spreading applicable to equities or only commodities ...
I am working with Interactive Brokers. Futures margin is ok for medium and long term traders. Only margins for naked short options is extremely high.
In my opinion, the size of your account should be at least 50,000 USD to trade futures and future spreads. I would not use more than 50 % of the account size for trading.
It depends on the specific trade if it is better to use spreads or outrights. But most trades work with outrights as well as with spreads. I would not use options, if you are not familiar with them. I do a lot of option trading, but I prefer selling them instead of buying. Thus, time value is on my side.
MRCI suggests seasonal trades that last a couple of days, others a couple of weeks. Rarely longer.
You can get a good insight in average profit by having a look at the site of MRCI. They offer 10 or 20 trades per month, and for each trade they show the profits for each of the most recent 15 years. You can get a free trial for 2 weeks, and I strongly suggest having a look at it.
As mentioned above, I work with Interactive Brokers, and I am quite happy there. There is a large number of US brokers, but their reports do not qualify for the Austrian tax authorities. I was very happy with the brokerage services of Carley Garner, but had to leave her because of this reason. She offers the best service of all brokers I worked with. I was also happy with RJO. They have an excellent research regarding grains & beans.
I know that there are traders trading the spreads between the indices, e.g. Nasdaq minus S&P. But I do not have experience in this field.
Yes, this is the book I was talking about. It would give you a good overview of how and why seasonal spreads are working. But you have to be aware that some of the mechanisms from 15 years ago do not work anymore. E.g. in the early years of this century most soybeans were grown in the US, and weather and seasons in the US determined the seasonal chart. Nowadays, weather and seasons in the Southern Americas are more important.
