NexusFi: Find Your Edge


Home Menu

 





Low Latency Calendar Spread Trading


Discussion in Emini and Emicro Index

Updated
    1. trending_up 503 views
    2. thumb_up 4 thanks given
    3. group 2 followers
    1. forum 2 posts
    2. attach_file 0 attachments




 
Search this Thread

Low Latency Calendar Spread Trading

  #1 (permalink)
gavinnoobsom
Sacramento CA
 
Posts: 2 since Mar 2023
Thanks Given: 1
Thanks Received: 1

I suspect that this is a fools errand but I don't know enough to be sure that it is..

I watch the calendar spread between ES contracts and I see that the spread fluctuates constantly.

I assume someone is making money when this spread gets just a bit too far out of range and subsequently mean reverts.

*Is* someone making money? Who? How much are they making? Why can't it be me?

It's frustrating because this is the kind of strategy that performs perfectly in a backtest, but fails in realtime because it's all about timing..

Anyway if it's not too boring for the veterans, I'd like to know the story here... I have considered jumping through all the hoops to figure out which colocated or VPS server provider to buy, which data feed to purchase, which broker to work with, etc, but I suspect after all of that, any time my algorithm detects the "buy" signal and sends in an order, the position I end up with will just be randomly located on either side of the mean, and then when exiting, the position I exit at will be similarly random.

So, please tell me what I need to know so I don't waste time trying =)

Reply With Quote
Thanked by:

Can you help answer these questions
from other members on NexusFi?
Deepmoney LLM
Elite Quantitative GenAI/LLM
Ninja Mobile Trader VPS (ninjamobiletrader.com)
Trading Reviews and Vendors
Exit Strategy
NinjaTrader
New Micros: Ultra 10-Year & Ultra T-Bond -- Live Now
Treasury Notes and Bonds
NexusFi Journal Challenge - April 2024
Feedback and Announcements
 
Best Threads (Most Thanked)
in the last 7 days on NexusFi
Get funded firms 2023/2024 - Any recommendations or word …
59 thanks
Funded Trader platforms
36 thanks
NexusFi site changelog and issues/problem reporting
22 thanks
The Program
20 thanks
GFIs1 1 DAX trade per day journal
19 thanks
  #2 (permalink)
 kevinkdog   is a Vendor
 
Posts: 3,647 since Jul 2012
Thanks Given: 1,890
Thanks Received: 7,338


gavinnoobsom View Post
I suspect that this is a fools errand but I don't know enough to be sure that it is..

I watch the calendar spread between ES contracts and I see that the spread fluctuates constantly.

I assume someone is making money when this spread gets just a bit too far out of range and subsequently mean reverts.

*Is* someone making money? Who? How much are they making? Why can't it be me?

It's frustrating because this is the kind of strategy that performs perfectly in a backtest, but fails in realtime because it's all about timing..

Anyway if it's not too boring for the veterans, I'd like to know the story here... I have considered jumping through all the hoops to figure out which colocated or VPS server provider to buy, which data feed to purchase, which broker to work with, etc, but I suspect after all of that, any time my algorithm detects the "buy" signal and sends in an order, the position I end up with will just be randomly located on either side of the mean, and then when exiting, the position I exit at will be similarly random.

So, please tell me what I need to know so I don't waste time trying =)

Lots of people trade calendar spreads, more so in the grains and energies, where supply/demand shocks frequently change the prices of one month as opposed to another.

The CME offers "exchange traded spreads" as a tradable symbol, which allows you to simultaneously sell June ES and buy Sep ES for example.

Different fundamentals drive the differences in prices between contract months. Interest rates, cost of carry, etc. Stat arb algos typically keep these differences in check.

If you are backtesting the spread symbol, if you apply proper slippage and commissions (commissions are double), you might have a way forward.

If you are backtesting the individual component symbols, you might just be seeing data timing differences, and not anything tradable.

I will say if you see a "perfect" backtest, that sounds too good to be true. And 99 times out of 100, it usually is.

Follow me on Twitter Reply With Quote
  #3 (permalink)
gavinnoobsom
Sacramento CA
 
Posts: 2 since Mar 2023
Thanks Given: 1
Thanks Received: 1



kevinkdog View Post
Lots of people trade calendar spreads, more so in the grains and energies, where supply/demand shocks frequently change the prices of one month as opposed to another.

The CME offers "exchange traded spreads" as a tradable symbol, which allows you to simultaneously sell June ES and buy Sep ES for example.

Different fundamentals drive the differences in prices between contract months. Interest rates, cost of carry, etc. Stat arb algos typically keep these differences in check.

If you are backtesting the spread symbol, if you apply proper slippage and commissions (commissions are double), you might have a way forward.

If you are backtesting the individual component symbols, you might just be seeing data timing differences, and not anything tradable.

I will say if you see a "perfect" backtest, that sounds too good to be true. And 99 times out of 100, it usually is.

First off I apologize for the "REMOVED" links below, as I am so new here it won't let me post links (even to threads on futures.io). Oh well. Sorry about that.

Great feedback, thank you. Perhaps the backtest I imagine is perfect because I am ignoring the important thing you pointed out: slippage. Oops.

I signed up to CME Group to look for the ES calendar spread symbols but they must be buried somewhere, not coming up in my initial search. I did find energy spreads and other types of spreads

Anyway your comments have interested me in exploring this idea further - but, as I'm relatively new to all of this, it's not clear which platform(s) would be a good place to explore. This old thread - REMOVED - seems to be pointing me in the direction of TradeStation or MultiCharts.. and some other research I did is pointing me towards Rithmic VPS/dedicated servers... and a broker?

I'm also kind of interested in writing my own trading software, I have decades of experience w/C++ and I sense that every millisecond matters in a trade like this.. this thread - REMOVED - has me thinking about running SierraCharts..

I wish I could just cut through the noise and get a recommendation for a dedicated or VPS linux machine in the CME Aurora data center with 0 hops between my software and the live order book feeds. I'd need to leverage a C++ library to deal with connecting and parsing the data and sending orders... and I'd need a broker.. and probably other things I'm not considering.

Anyway thanks again for your help!

Reply With Quote




Last Updated on March 15, 2023


© 2024 NexusFi™, s.a., All Rights Reserved.
Av Ricardo J. Alfaro, Century Tower, Panama City, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada)
All information is for educational use only and is not investment advice. There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
About Us - Contact Us - Site Rules, Acceptable Use, and Terms and Conditions - Privacy Policy - Downloads - Top
no new posts