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Seasonal Trades


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Seasonal Trades

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  #201 (permalink)
Vienna
 
 
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depending on cold storage report and cattle on feed (monday , today) it s going to be a wild ride :-)

it looks like a good start right now.

short term behavior in the LEj20-HEJ20 the last two days was a leading indicator .

thats why i was asking!

thx myrrdin!

SPOMI

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  #202 (permalink)
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Kruger View Post
Is anyone else considering this spread trade: Buy May20 Soybeans & Sell May20 Wheat (CBOT)?

The entry price is attractive (low) but this is somewhat risky considering the ongoing China-USA trade debacle. I am monitoring the movement for a possible entry early Feb.

Will appreciate the views of the seasoned traders.

Regards

I entered this trade on 4th Feb @ 337,75
On 18th Feb it traded @ 361,75. Had I closed the trade then the profit would have been $1200.00 (before costs)
My profit target was 370,00 so I decided to stay in the trade.
Unfortunately it moved south and with the uncertainty caused by corona virus (mainly), I decided to close the trade yesterday @ 349,00. Profit before fees = $562.50

Regards

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  #203 (permalink)
Market Wizard
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Kruger View Post
I entered this trade on 4th Feb @ 337,75
On 18th Feb it traded @ 361,75. Had I closed the trade then the profit would have been $1200.00 (before costs)
My profit target was 370,00 so I decided to stay in the trade.
Unfortunately it moved south and with the uncertainty caused by corona virus (mainly), I decided to close the trade yesterday @ 349,00. Profit before fees = $562.50

Regards

In my opinion, you can do two things to avoid loosing on trades just before the target:

1. When a trade reaches 50 % or 80 % of my target I often place a end of day stop.

2. I place a band of exit orders, eg. in the range from 75 % to 100 % of my target profit.

Best regards, Myrrdin

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  #204 (permalink)
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Thanks for this awesome trade. This really inspired me to look more into commodity spreads. One question I have in regards to the profit target.

How do u define your Profite target. You look at support or resistance levels or do you define that target based on how the spread did during the previous few years.

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  #205 (permalink)
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marksuper View Post
Thanks for this awesome trade. This really inspired me to look more into commodity spreads. One question I have in regards to the profit target.

How do u define your Profite target. You look at support or resistance levels or do you define that target based on how the spread did during the previous few years.

I generally look at the previous years movements (MRCI) as a guide. Regarding this particular trade, it has moved up since I exited. I, with hindsight, should have stayed in but with all the noise going on in the world, I took the cautious route. Ideally what I was anticipating was a further drop in the price so I exited to lock in the profit and then hoping to re-enter the trade on the bounce (which never happened). Having said that however I can't complain about the profit on this one.

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  #206 (permalink)
Market Wizard
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Kruger View Post
I generally look at the previous years movements (MRCI) as a guide. Regarding this particular trade, it has moved up since I exited. I, with hindsight, should have stayed in but with all the noise going on in the world, I took the cautious route. Ideally what I was anticipating was a further drop in the price so I exited to lock in the profit and then hoping to re-enter the trade on the bounce (which never happened). Having said that however I can't complain about the profit on this one.

Looking at previous years movement only helps in case fundamentals were comparable a year ago. I prefer looking at years with comparable fundamentals, even if that is some years ago.

Additionally I like comparing the cahrt with the seasonal chart for the most recent months. In case the chart follows the seasonal chart nicely, this is a good argument to enter a seasonal trade.

I also do not enter a trade against the COT data.

Best regards, Myrrdin

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  #207 (permalink)
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@myrrdin
"Looking at previous years movement only helps in case fundamentals were comparable a year ago. I prefer looking at years with comparable fundamentals, even if that is some years ago."

You expressed it better than I did. I was referring to more than one year.

Regards

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  #208 (permalink)
Market Wizard
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I was asked to give some information on educational sites regarding seasonal trading.

For many years, I am a customer of MRCI. They offer seasonal charts for outright and spreads (intra- and inter-commodity spreads), they offer trade suggestions (I only take them as a suggestion, but do not follow them systematically), and they offer seasonal data regarding volatility, all in excellent quality. (I do a lot of options trading, and, thus, information on seasonal volatility is a helpful add-on.)

MRCI also offers a consulting service. They select individual trades from their database, and explain how to trade them in the actual year. You have to pay extra for this information. I do not use this service.

I also combine seasonal trading with trading based on COT data. I receive COT data from a German data supplier, but was a customer of Floyd Upperman for some time. Of course, you can use the original COT data, which is free of charge, but it is helpful to get nice charts.

Ron99 has developed an excellent database for seasonal trades. You find the link somewhere in this thread, but I assume he will answer to your question.

Best regards, Myrrdin

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  #209 (permalink)
Market Wizard
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One of the seasonal trades I currently follow is the OJH-OJK spread.

This year it followed the seasonal chart very nicely which for me is a very important argument to enter the trade. I know, it is not grains or meats, but in recent years it has been a good idea to follow this trade.

Best regards, Myrrdin

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  #210 (permalink)
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myrrdin View Post
One of the seasonal trades I currently follow is the OJH-OJK spread.

This year it followed the seasonal chart very nicely which for me is a very important argument to enter the trade. I know, it is not grains or meats, but in recent years it has been a good idea to follow this trade.

Best regards, Myrrdin

Hi, I am following that spread too, what is the fair price to enter in your opinion?

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  #211 (permalink)
Market Wizard
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M4STR0 View Post
Hi, I am following that spread too, what is the fair price to enter in your opinion?

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.

Best regards, Myrrdin

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  #212 (permalink)
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myrrdin View Post
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.

Best regards, Myrrdin

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?

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  #213 (permalink)
Market Wizard
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M4STR0 View Post
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.

Best regards, Myrrdin

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  #214 (permalink)
Market Wizard
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My DCOT charts are here.
https://public.tableau.com/profile/ron.h8870

My charts of daily futures settlements since 2006 can be found on this page.
https://public.tableau.com/profile/ron.h8870

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  #215 (permalink)
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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.

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  #216 (permalink)
Market Wizard
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mosalem2003 View Post
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.

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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.

Best regards, Myrrdin

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  #217 (permalink)
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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.

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  #218 (permalink)
Market Wizard
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mosalem2003 View Post
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.

Best regards, Myrrdin

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  #219 (permalink)
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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 ...

Is this the book you referred to https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.amazon.ca/Encyclopedia-Commodity-Financial-Spreads/dp/0471716006&ved=2ahUKEwjo8sjb0KPuAhV9GFkFHTFbD8gQFjABegQIAhAB&usg=AOvVaw0zvRx4mq2R_w3znhhMuhcg

Thanks a lot in advance ...




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  #220 (permalink)
Market Wizard
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mosalem2003 View Post
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 ...

Is this the book you referred to https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.amazon.ca/Encyclopedia-Commodity-Financial-Spreads/dp/0471716006&ved=2ahUKEwjo8sjb0KPuAhV9GFkFHTFbD8gQFjABegQIAhAB&usg=AOvVaw0zvRx4mq2R_w3znhhMuhcg

Thanks a lot in advance ...




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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.

Best regards from Austria, Myrrdin

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  #221 (permalink)
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Thanks a lot @myrrdin ..you have provided enough information for me to do some hoem work on my side. I will follow up accordingly. Thanks a lot for your help!

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  #222 (permalink)
Market Wizard
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mosalem2003 View Post
Thanks a lot @myrrdin ..you have provided enough information for me to do some hoem work on my side. I will follow up accordingly. Thanks a lot for your help!

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You are welcome. Good luck !

Best regards, Myrrdin

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  #223 (permalink)
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Which broker can allow access to exchange spreads for retail ? Or who are the brokers that would recognize spreads and reduce the margin as per SPAN. I want to trade yield curve spreads and commodity spread but not sure if any retail broker can understand it. I am with AMP and IBKR now.

Ex : If I want to trade NOB spread 5 ZN - 2 ZB... This is 7 contracts to leg it and can be a huge margin if not treated from the broker as spread.. also how can I trade the symbol NOB to reduce the accuracy requirements and timing of legging .. This is not a clear area in the retail .. any recommendation of brokers who allow or recognize spreading or tools or platforms are appreciated. I use Sierra Chart and IBKR TWS..

I believe that you trade them easily and have no issue with this topic but not sure why every broker I consult seems not aware of the reduced margins specially for yield curve treasuries spreads ..


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Market Wizard
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mosalem2003 View Post
Which broker can allow access to exchange spreads for retail ? Or who are the brokers that would recognize spreads and reduce the margin as per SPAN. I want to trade yield curve spreads and commodity spread but not sure if any retail broker can understand it. I am with AMP and IBKR now.

Ex : If I want to trade NOB spread 5 ZN - 2 ZB... This is 7 contracts to leg it and can be a huge margin if not treated from the broker as spread.. also how can I trade the symbol NOB to reduce the accuracy requirements and timing of legging .. This is not a clear area in the retail .. any recommendation of brokers who allow or recognize spreading or tools or platforms are appreciated. I use Sierra Chart and IBKR TWS..

I believe that you trade them easily and have no issue with this topic but not sure why every broker I consult seems not aware of the reduced margins specially for yield curve treasuries spreads ..


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The NOB spread 5 ZN - 2 ZB can be traded at IB at a margin of $4500. This is a reduced margin compared to the margin for 2 outright ZB futures.

Best regards, Myrrdin

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  #225 (permalink)
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mosalem2003 View Post

I believe that you trade them easily and have no issue with this topic but not sure why every broker I consult seems not aware of the reduced margins specially for yield curve treasuries spreads ..


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Effectively, Saxo bank is one of, I guess many of the brokers in Europe, that do not yet apply SPAN rules, so it is a no go for trading the spreads until this is changed for me...

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Just use Interactive Brokers they know about spread trading and apply low margins for that.

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Market Wizard
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Sagal View Post
Effectively, Saxo bank is one of, I guess many of the brokers in Europe, that do not yet apply SPAN rules, so it is a no go for trading the spreads until this is changed for me...

Spread margins at Interactive Brokers are significantly lower than at Saxo Bank.

It seems to me that Saxo Bank is more interested in day traders, using CFDs or outright futures.

Best regards, Myrrdin

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myrrdin View Post
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.

It's funny that you should say that because I actually think the opposite for Metals vs Energies. but in this case we are both right since we are talking about different things! You are talking about spreads, and I think about butterflies. Just like a spread has significant less risk than the outrights, a butterfly has significantly less risk than spreads. In the Energy markets they actually have additional margin discounts for Butterflies but in the Metals they do not. Hence for Butterlies, Metals are a LOT higher margin than energies.


mosalem2003 View Post
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.

For CME a lot of this is available on their Website. Go to the product page and then click on margins

So for Gold outrights you can see its $10000 per contract.
https://www.cmegroup.com/trading/metals/precious/gold_performance_bonds.html
For Gold spreads it drops to $600!
https://www.cmegroup.com/trading/metals/precious/gold_performance_bonds.html?marginsTab=INTRA
But for a gold Butterfly it's $1200 (2X$600)

Prompt Crude is $4500. Note for crude, which month your trading changes the margin requirement!
https://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_performance_bonds.html
For spreads and butterflies in Crude it very much depends upon the actual spread structure. For example if you look about half way down you will see the margin requirement for M21/N21 spread is $125 and the requirement for a M21/N21/Q21 butterfly even lower at $75.
https://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_performance_bonds.html?marginsTab=INTRA


mosalem2003 View Post
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.

How you get into the spread is irrelevant. The minimum margin requirements are set by the exchange, and the SPAN system looks at your total position and decides what the margin requirement is based upon a predetermined set of rules. While there is no need to have a deeper understanding of how SPAN works, I do find that understanding details like this will improve your understanding of not only margining but also risk in general.

https://www.cmegroup.com/clearing/risk-management/span-overview.html


myrrdin View Post
The NOB spread 5 ZN - 2 ZB can be traded at IB at a margin of $4500. This is a reduced margin compared to the margin for 2 outright ZB futures.

Best regards, Myrrdin

For some strange reason I can't find this on the Website. I did run it through PC SPAN though. Exchange min on the 5:2 NOB spread is $3750 Maintenance, $4125 Initial. So if thats right IB is about a 10% premium to exchange minimums.

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SMCJB View Post

For some strange reason I can't find this on the Website. I did run it through PC SPAN though. Exchange min on the 5:2 NOB spread is $3750 Maintenance, $4125 Initial. So if thats right IB is about a 10% premium to exchange minimums.

That sounds very reasonable. IB is usually a little bit higher than SPAN, with some exceptions: E.g. for naked short options they are much higher.

Best regards, Myrrdin

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MRCI suggests entering the NGX-NGK and the NGZ-NGM spreads in the second half of February or first half of March, respectively.

There is a good relation between "Best Equity Amount" and "Worst Equity Amount".

The trade worked in 14 of the most recent 15 years.

The spread is not far above its multi-year lows.

This year, I enter a little early, trying to use the current high price of Natural Gas as a consequence of the cold weather as an entry point.

My (conservative) target is around the highs in December / January.

Best regards, Myrrdin

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